August 2016 – Sydney CBD Strata & Office Market Update

12 August, 2016 / Vanessa Rader and Anthony Harris

The trends around 2015 for the Sydney CBD Office market have continued into 2016 with vacancies falling to new lows and growth in effective rents outperforming. Face rents have shown strong increases for both prime and secondary spaces, while incentives are more commonplace in the 20% range, a level unseen in this market for over 10 years.

For the strata investment market, while assets are tightly held, high demand has resulted in unexpected levels of growth nearing 30% on last years results. The average capital value is now recorded at over $8,000/sqm this level of growth has been unseen over the last ten years.

The Sydney CBD Strata market has continued its growth profile of 2015 into the first half of 2016. Despite a limited pool of sales transactions this half year ($38.407 million), the overall capital value for strata premises has grown 29.33% on 2015 results to average $8,067/sqm across the CBD. This rate of growth exceeds the total increase in values achieved during the period between 2006 and 2015 where total growth of 25.33% was achieved. Interest in Strata office offerings have continued from an active 2015, where competition for product was driven heavily by the low cost of financing together with the strength of the broader CBD office market motivating occupiers to shelter from rental increases and investors to capitalise on rising rents. During this six month period a number of larger floor strata premises were sold bringing the average sale price up to $1.324 million a 56.94% increase on 2015 highlighting the ability for purchasers to finance well above the historical average sale price of around $700,000.

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