In late 2015 Newcastle City Council developed their Economic Development Strategy for 2016–2019, this has been established to set a framework for the city including the renewal of the city centre through the light rail project and other rejuvenation projects including the Hunter Street mall precinct. Unemployment in the region has improved over the last year with the expectation of increased employment opportunities particularly in the tourism, retail and education industries.
The Newcastle CBD office market is 251,383sqm in size, however reducing this period due to a 4,578sqm withdrawal of space. Despite this reduction in the market size, vacancy has resulted in some increase over the year with direct vacancy accounting for 12.4% or 31,221sqm with an additional 1,373sqm or 0.6% sub vacancy. A grade historically is the best performer with this year no different, however given some small additions and uptick in vacant space has seen this rate rise to 10.7% including 1.0% of sublease space. B grade represents 13,209 sqm of vacant stock or 14.6%, C grade 11.6% and D grade 25.0%. This reduction in occupied stock has been driven by a number of relocations outside of the CBD boundaries as well as space contractions, the largest being the ATO which has reduced its space requirements by close to 7,000sqm within 266 King Street, while other large space users such as Newcastle Herald, Telstra and CBA have also reduced their footprint.
Over the 12 months to January 2016, there was no projects completed, however the remainder of 2016 will see the addition of 3,700 sqm of stock to the market at 168 Parry Street. Looking further ahead, 18 Honeysuckle Drive is currently under construction, as part of the Edition Apartments development this property includes podium level office space of 6,237 sqm due for completion mid to late 2017. Another development at 10–12 Stewart Avenue is currently under construction and expected to provide 10,000sqm of A grade office space to the Newcastle West market. The proposed Civic West Carpark redevelopment at 291 King Street, approved for a 9,600 sqm office building remains in the development pipeline and unlikely to be added until pre-commitment is secured. While the heritage property at 108–112 Hunter Street has development approval for redevelopment into residential apartments removing 2,769 sqm of office stock from the market later this year.