Sydney CBD vacancy remains tight despite falling demand

The Property Council of Australia’s Office Market Report has revealed that Sydney CBD vacancy increased over the last six months from 3.9 per cent to 5.6 per cent, still very low by historic standards.

While the Sydney CBD recorded its lowest level of demand in 11 years for the six months to July 2020, vacancy generally remains tight, especially for premium office space,

“Sydney’s office market has traditionally been very tight and recorded some of its lowest vacancy rates in the past couple of years, which has put us in a better position to navigate the challenges of the COVID-19 pandemic being felt right across the property industry,” Property Council of Australia’s NSW Acting Executive Director Belinda Ngo said today.

“Tenant demand fell by 58,675 sqm over the six months with most of this occurring in B grade office space, whereas there was slight positive demand for Premium space.

“We saw some new supply enter the Sydney CBD with more to come over the next two years. There is 117,161sqm of new stock due to enter the market in the second half of 2020, and a strong pipeline of new office stock planned for 2021and 2022.

Office vacancies are calculated on whether a lease is in place for office space, not whether the tenant’s employees are occupying the space or working from home.

Key market indicators, Sydney CBD (aggregate)

Grade

Vacancy,

Jul 20 (%)

Vacancy,

Jan 20 (%)

Net absorption, 6 months to

Jul 20 (sqm)

Net absorption, 12 months to

Jul 20 (sqm)

Premium

3.8

3.6

1,301

20,587

A

4.7

2.6

-11,971

9,371

B

7.5

5.2

-36,864

-111,409

C

7.8

6.8

-5,225

-10,758

D

7.0

3.7

-5,916

-6,081

Total

5.6

3.9

-58,675

-98,290

 

“The support of the NSW Government to keep construction going and ensure that we have a strong future pipeline of work is more important than ever, not only to ensure we can continue to keep people in jobs, but also support the overall economic recovery of NSW.

“The extra support, leadership and confidence from Government needs to continue not only in improving the planning system but also in getting people back into our CBDs and into offices to activate city centres and support local businesses, creating vital economic activity for Sydney and our regional areas both directly and indirectly.”

Market analysts will be closely watching tenant demand and sublease vacancy over the next six months as the economic effects of the pandemic continues to play into office markets.

Analysis and further data for office markets in the Sydney CBD, North Shore and Macquarie Park are provided further below.

 

Media contact:  Michelle Guido| M 0437 315 198 |  E mguido@propertycouncil.com.au

 

Office Market Report July 2020

Analysis – Sydney CBD market

Headline comments:

  • Sydney CBD vacancy increased over the period
  • The decrease was mainly due to negative demand
  • All grades of space recorded vacancy increases over the period
  • Negative demand was recorded in the A, B, C and D Grade segments
  • There is a steady stream of space due to come online over the short to medium term

 

Vacancy analysis:

  • Vacancy in the Sydney CBD office market increased from 3.9 percent to 5.6 percent
  • This was due to -58,675sqm of net absorption and 25,162sqm of supply additions
  • 1,000sqm of space was withdrawn over the period

 

Premium:

  • Vacancy increased from 3.6 percent to 3.8 percent
  • This was due to 3,610sqm of supply additions

 

A Grade:

  • Vacancy increased from 2.6 percent to 4.7 percent
  • This was due to 20,310sqm of supply additions and -11,971sqm of net absorption

 

B Grade:

  • Vacancy increased from 5.2 percent to 7.5 percent over the period
  • This was due to -36,864sqm of net absorption and 1,242sqm of supply additions

 

C Grade:

  • Vacancy increased from 6.8 percent to 7.8 percent
  • This was due to -5,225sqm of net absorption

 

D Grade:

  • Vacancy increased from 3.7 percent to 7.0 percent
  • This was due to -5,916sqm of net absorption

 

Future supply:

  • 117,161sqm of new stock is due to enter the market in the second half of 2020
  • This will be followed by 114,648sqm in 2021
  • 143,481sqm is due to come online from 2022 onwards
  • A total of 144,663sqm of space is mooted

 

 

Office Market Report July 2020

Analysis – Macquarie Park market

Headline comments:

  • Vacancy increased over the period
  • This was due to supply additions
  • Negative demand was concentrated in the B Grade segment
  • There is some space due to come online in the second half of 2020, and then from the start of 2022 onwards

 

Vacancy analysis:

  • Vacancy increased from 4.6 percent to 6.8 percent over the six months to July 2020
  • This was due to 35,000sqm of supply additions
  • Net absorption over the period totalled 13,569sqm
  • Negative demand was concentrated in the B Grade segment

 

Future supply:

  • There is 14,874sqm of space in the pipeline for the second half of 2020
  • No space is scheduled for 2021
  • 66,785sqm is due to come online from 2022 onwards
  • 83,477sqm of projects are mooted

 

Key market indicators, Macquarie Park (aggregate)

Grade

Vacancy,

Jul 20 (%)

Vacancy,

Jan 20 (%)

Net absorption, 6 months to

Jul 20 (sqm)

A

6.3

3.3

15,268

B

6.8

5.4

-3,547

C

17.6

23.2

1,848

Total

6.8

4.6

13,569

 

 

 

Office Market Report July 2020

Analysis –North Shore market

Headline comments:

  • Vacancy for the overall North Shore market increased over the period
  • This was due to negative net absorption
  • There is a significant amount of space due to enter the North Shore market in the second half of 2020

 

Vacancy analysis:

  • Total vacancy for the North Shore increased from 6.7 percent in January 2020 to 8.4 percent in July 2020
  • This was due to -23,281sqm of net absorption

 

North Sydney:

  • North Sydney vacancy increased from 7.6 percent to 8.0 percent over the six months to July 2020
  • This was due to 4,230sqm of supply additions
  • 625sqm of net absorption was recorded

 

Crows Nest / St Leonards:

  • Vacancy increased from 7.0 percent to 9.0 percent
  • This was despite 4,230sqm of withdrawals
  • Net absorption over the period totalled -9,976sqm

 

Chatswood:

  • Vacancy in Chatswood increased in the six months to July 2020 from 3.7 percent to 8.8 percent
  • The increase was due to -13,930sqm of net absorption

 

Future supply:

  • 125,026sqm of space is due to enter the North Shore market in the remainder of 2020
  • No space is due to be completed in 2021
  • 14,000sqm is due to come online from 2022 onwards

Key market indicators, North Shore (aggregate)

Grade

Vacancy,

Jul 20 (%)

Vacancy,

Jan 20 (%)

Net absorption, 6 months to

Jul 20 (sqm)

A

6.9

6.0

-3,533

B

11.3

7.6

-16,058

C

7.3

6.5

-6,767

D

9.9

10.8

220

Total

8.4

6.7

-23,281

 

Key market indicators, North Shore (by locale)

Locale

Vacancy,

Jul 20 (%)

Vacancy,

Jan 20 (%)

Net absorption, 6 months to

Jul 20 (sqm)

North Sydney

8.0

7.6

625

Crows Nest / St Leonards

9.0

7.0

-9,976

Chatswood

8.8

3.7

-13,930

 

Future supply, North Shore (by locale)

 

Future supply by year (sqm)

Locale

2020

2021

2022+

Mooted

North Sydney

98,026

0

11,000

0

Crows Nest / St Leonards

27,000

0

0

24,300

Chatswood

0

0

3,000

0

Total North Shore

125,026

0

14,000

24,300