Demand fuels drop in Sydney office market vacancy rate

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Demand fuels drop in Sydney office market vacancy rate

The strongest demand in four years has helped reduce vacancy rates across the Sydney CBD office market, according to the Property Council of Australia’s latest Office Market Report.

The vacancy rate fell from 8.4 percent to 7.4 percent in the six months to January 2015.

“Sydney’s office market now has the lowest vacancy rate and enjoyed the strongest demand of all capital cities,” NSW Executive Director Glenn Byres said today.

“Sydney’s CBD saw positive demand at the top end of the market, and declining vacancy rates across all grades.

“This indicates the economy that underpins the CBD is in a healthy state but we will need to maintain growth as a strong period of supply looms.

“Net absorption totalled 54,279sqm in the six months to January 2015 – the best demand story since the equivalent period four years ago.

“The vacancy rate across premium grade assets fell from 8.2 percent to 7.2 percent and the A grade vacancy rate fell from 9.5 percent to 8 percent.

“A grade assets accounted for the bulk of new demand with 47,822sqm of net absorption.

“Withdrawals across the market over the past six months totalled 33,064sqm while 42,604sqm of new stock was added.”

Mr Byres said 171,208sqm of new stock was due to enter the market in 2015 and a further 129,176sqm of projects are scheduled for completion in 2016.

For further comment:

Nation-wide commentary

Glenn Byres
NSW Executive Director
Ph: 02 9033 1906 or 0419 695 435

John Nguyen
National Research Manager
Ph: 02 9033 1943 or 0410 449 210

Attached: Further vacancy analysis

 

Analysis & Commentary, Sydney CBD, January 2015

Headline comments:

  • Sydney CBD posted a decrease in vacancy in the six months to January 2015
  • This was due to positive demand and withdrawals
  • The higher grades of space recorded positive demand over the period
  • There is a steady stream space in the pipeline over the next 2 years

Vacancy analysis:

  • Vacancy in the Sydney CBD office market decreased from 8.4 percent to 7.4 percent
  • This was due to 54,279sqm of net absorption, the highest since January 2011, and 33,064sqm of withdrawals
  • 42,604sqm of space was added over the period

Premium:

  • Vacancy decreased from 8.2 percent to 7.2 percent
  • This was mainly due to 7,3sqm of net absorption

A Grade:

  • Vacancy decreased from 9.5 percent to 8.0 percent
  • This was due to 47,822sqm of net absorption
  • 21,431sqm of space was added over the period

B Grade:

  • Vacancy decreased from 7.6 percent to 7.3 percent over the period
  • This was due to 6,146sqm of net absorption
  • 1,673sqm of space was added over the period

C Grade:

  • Vacancy decreased from 7.1 percent to 6.6 percent
  • This was due to 9,700sqm of withdrawals
  • Net absorption was -6,336sqm

D Grade:

  • Vacancy decreased from 7.9 percent to 7.0 percent
  • This was due to 2,864sqm of withdrawals
  • Net absorption was -856sqm

Future supply:

  • 171,208sqm of new stock is due to enter the market in 2015
  • 129,176sqm of projects are scheduled to be completed in 2016
  • 161,0sqm is due to come online from 2017 onwards
  • A total of 58,700sqm of space is mooted

Key market indicators, Sydney CBD (aggregate)

Grade

Vacancy,

Jan 15 (%)

Vacancy,

Jul 14 (%)

Net absorption, 6 months to

Jan 15 (sq m)

Net absorption, 12 months to Jan 15 (sq m)

Premium

7.2

8.2

7,3

15,201

A

8.0

9.5

47,822

52,518

B

7.3

7.6

6,146

28,577

C

6.6

7.1

-6,336

-13,327

D

7.0

7.9

-856

-4,707

Total

7.4

8.4

54,279

78,262

 

More information available at www.propertyoz.com.au/officemarketreport