Demand surges in Sydney CBD
Sydney’s strong economy has underpinned robust demand and the lowest vacancy rates for over five years across the CBD office market, according to the Property Council’s Office Market Report.
The vacancy rate fell from 7.4 percent to 6.3 percent in the six months to July 2015.
“Sydney’s economic momentum continues to fuel the market and is feeding into strong demand for office space,” NSW Executive Director Glenn Byres said.
“Demand reached its highest level in over four years and is double the historical average, with net absorption over the past six months totaling 60,405sqm.
“The vacancy rate is now the lowest it has been since January 2009 and has been cut from 8.4 percent in just the past 12 months.
“The bulk of demand was for prime grade space and led to vacancy rates dropping from 7.2 percent to 5.2 percent in premium assets and 8 percent to 6.7 percent in A grade.
“Net absorption across Sydney’s CBD totaled 60,405 sqm, with the 21,170sqm of withdrawls and 23,633sqm of additional space effectively cancelling each other out.
“The only exception to the trend was C grade, which was the only one to record a slight rise in vacancy rates from 6.6 percent to 6.9 percent.
“It is also worth noting – all three major suburban markets also enjoyed positive demand over the past six months.”
Mr Byres said there is 160,337sqm of new stock due to enter the market in the second half of 2015, with a further 129,176sqm of new projects due for completion in 2016.
Media contact: Glenn Byres | M 0419 695 435 | E [email protected]
Analysis & Commentary, Sydney CBD, July 2015
Headline comments:
- Sydney CBD posted a decrease in vacancy in the six months to July 2015 to its lowest level in over five years
- This was due positive demand and withdrawals
- The higher grades of space recorded positive demand over the period
- There is a steady stream of space in the pipeline over the next 18 months
Vacancy analysis:
- Vacancy in the Sydney CBD office market decreased from 7.4 percent to 6.3 percent, the lowest since January 2009
- This was due to 60,405sqm of net absorption, the highest since January 2011, and 21,170sqm of withdrawals
- 23,633sqm of space was added over the period
Premium:
- Vacancy decreased from 7.2 percent to 5.2 percent
- This was mainly due to 17,924sqm of net absorption
A Grade:
- Vacancy decreased from 8.0 percent to 6.7 percent
- This was due to 30,813sqm of net absorption
- 8,133sqm of space was added over the period
B Grade:
- Vacancy decreased from 7.3 percent to 6.2 percent over the period
- This was due to 17,985sqm of net absorption
C Grade:
- Vacancy increased from 6.6 percent to 6.9 percent
- This was due to -5,295sqm of net absorption
- 4,242sqm was withdrawn over the period
D Grade:
- Vacancy decreased from 7.0 percent to 5.5 percent
- This was due to 4,091sqm of withdrawals
- Net absorption was -1,022sqm
Future supply:
- 160,337sqm of new stock is due to enter the market in the second half of 2015
- 129,176sqm of projects are scheduled to be completed in 2016
- 101,0sqm is due to come online from 2017 onwards
- A total of 118,700sqm of space is mooted
Key market indicators, Sydney CBD (aggregate)
Grade |
Vacancy, Jul 15 (%) |
Vacancy, Jan 15 (%) |
Net absorption, 6 months to Jul 15 (sq m) |
Net absorption, 12 months to Jul 15 (sq m) |
Premium |
5.2 |
7.2 |
17,924 |
25,427 |
A |
6.7 |
8.0 |
30,813 |
78,635 |
B |
6.2 |
7.3 |
17,985 |
24,131 |
C |
6.9 |
6.6 |
-5,295 |
-11,631 |
D |
5.5 |
7.0 |
-1,022 |
-1,878 |
Total |
6.3 |
7.4 |
60,405 |
114,684 |