February 2018 – Sydney CBD Office Market Update

8 February, 2018 / Vanessa Rader and Anthony Harris

The fire in the Sydney CBD market has started to settle with net absorption of just 345sqm recorded the six months to January 2018, despite a large withdrawal of stock. As a result, this stock level change has seen vacancy continue to compress to a low of 4.6%.

Strong occupier demand over the past four years has fuelled rental growth now continuing due to lack of stock, while investment interest driven domestically has ensured that yields too have bypassed prior historic lows.

Even the smaller strata market has benefitted with capital values over 25% up on 2016 results as investors flock and owner occupiers try to shelter from continued rent hikes.

After four years of strong supply completions, its first decrease in total stock size. Now representing 5,023,997sqm, the withdrawal of 11 buildings, (due to the vast infrastructure projects within the CBD, refurbishments and conversion) has resulted in net supply of -62,319sqm for the six months to January 2018 or -54,606sqm for the 2017 calendar year. The last six months saw limited major completions with re-entering refurbished stock dominating the new additions, including 10 Shelley Street bringing back 27,718sqm into the market, while the only new completion being International House Sydney of 6,885sqm. Looking ahead, 2018 will bring over 85,000sqm into the market, led by refurbishment projects (over 80% precommitted) including Darling Park Tower 2 and 140 Sussex Street.

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