Tightly held historical position of the CBD has supported the city to weather the storm

The Property Council of Australia’s Office Market Report for January 2021 has revealed that the office market vacancy remains below ten per cent in the tightly held Sydney CBD office market, despite the impacts of COVID during 2020.

Sydney CBD vacancy increased from 5.6 per cent to 8.6 percent over the six months to January 2021. The CBD received almost 110,00sqm of new supply and negative net absorption of -54,671sqm, bumping the vacancy rate up to its highest level in seven years.

“Sydney CBD’s office market continues to see a tightly held office market, with vacancy rates remaining comfortably below ten percent,” NSW Executive Director Jane Fitzgerald said today.

Positive demand for space was felt in metropolitan markets outside of the CBD, with Paramatta, Crows Nest/St Leonards and Wollongong all recording relatively strong positive demand.

The tightly held historical position of the CBD has supported the city to weather the storm that COVID 19 has had on the office market. As the country and workforce readjusts to a new normal through 2021 and 2022, the Sydney CBD office market remains a standout place to conduct business.

“Sydney has close to 280,000 sqm of office space coming online over the next two years, so it is an ideal time to secure prime office space for considered future tenants.

“We support the statements by the Premier and Treasurer of NSW highlighting that the CBDs are the engine room of the NSW economy and continued support from employers to encourage people back to the cities is more important now than ever,” Ms Fitzgerald said.

“Infrastructure delivery needs to remain a priority for government to deliver and must be backed up with the appropriate planning reform to allow for delivery of a globally competitive city.”

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.

Media contact: Lauren Conceicao | M 0499 774 356 |  E [email protected]

Office Market Report January 2021

Analysis – Sydney CBD market

 Headline comments:

• Sydney CBD vacancy increased over the period
• The increase was due to supply additions and negative demand
• All grades of space recorded negative demand and vacancy increases
• There is a steady stream of space in the pipeline to be delivered over the next 2 years

Vacancy analysis:

• Vacancy in the Sydney CBD office market increased from 5.6 percent to 8.6 percent
• This was due to 107,729sqm of supply additions and -54,671sqm of net absorption
• 3,5sqm of space was withdrawn over the period

Premium:

• Vacancy increased from 3.8 percent to 6.2 percent
• This was due to -24,054sqm of net absorption and 5,554sqm of supply additions

A Grade:

• Vacancy decreased from 4.7 percent to 9.7 percent
• This was due to 94,854sqm of supply additions and -5,187sqm of net absorption

B Grade:

• Vacancy increased from 7.5 percent to 8.9 percent over the period
• This was due to -15,043sqm of net absorption and 6,321sqm of supply additions
• 3,5sqm of space was withdrawn over the period

C Grade:

• Vacancy increased from 7.8 percent to 9.4 percent
• This was due to -6,384sqm of net absorption and 1,000sqm of supply additions

D Grade:

• Vacancy decreased from 7.0 percent to 9.2 percent
• This was due to -4,003sqm of net absorption

Future supply:

• 119,277sqm of new stock is due to enter the market in 2021
• This will be followed by 159,981sqm in 2022
• A total of 187,663sqm of space is mooted

 

Key market indicators, Sydney CBD (aggregate)

 

Grade	Vacancy, Jan 21 (%)	Vacancy, Jul 20 (%)	Net absorption, 6 months to Jan 21 (sqm)
Premium	6.2%	3.8%	-24,054
A	9.7%	4.7%	-5,187
B	8.9%	7.5%	-15,043
C	9.4%	7.8%	-6,384
D	9.2%	7.0%	-4,003
Total	8.6%	5.6%	-54,671

 

Headline comments:

• Vacancy increased over the period
• This was due supply additions and negative demand
• All grades of space recorded negative demand
• There is no space due to come online until 2022

Vacancy analysis:

• Vacancy increased from 6.8 percent to 9.6 percent over the six months to January 2021
• This was due -15,573sqm of net absorption and 14,874sqm of supply additions
• All grades of space recorded negative demand

Future supply:

• There is no space due to come online in 2021
• 34,800sqm is due to come online in 2022
• 98,116sqm of projects are mooted

Office Market Report January 2021

Analysis -Macquarie Park market

Key market indicators, Macquarie Park (aggregate)

Grade	Vacancy, Jan 21 (%)	Vacancy, Jul 20 (%)	Net absorption, 6 months to Jan 21 (sqm)	Net absorption, 12 months to Jan 21 (sqm)
A	10.1%	6.3%	-10,231	5,037
B	8.1%	6.8%	-2,941	-6,488
C	13.9%	17.6%	-2,401	-553
Total	9.6%	6.8%	-15,573	-2,004

 

Office Market Report January 2021

Analysis – North Shore market

Headline comments:

• Vacancy for the overall North Shore market increased over the period
• This was due to supply additions and negative demand
• All North Shore markets recorded negative demand except Crows Nest / St Leonards
• There is some space in the pipeline due to enter the North Shore market over the short to medium term

Vacancy analysis:

• Total vacancy for the North Shore increased from 8.4 percent in July 2020 to 16.9 percent in January 2021
• This was due to 125,026sqm of supply additions and -16,6sqm of net absorption
• 570sqm of space was withdrawn over the period

North Sydney:

• North Sydney vacancy increased from 8.0 percent to 19.5 percent over the six months to January 2021
• This was due to 98,026sqm of supply additions and -16,230sqm of net absorption

Crows Nest / St Leonards:

• Vacancy increased from 9.0 percent to 12.8 percent
• This was due to 27,000sqm of supply additions
• Demand was positive with 11,909sqm of net absorption recorded

Chatswood:

• Vacancy in Chatswood increased, in the six months to January 2021, from 8.8 percent to 13.0 percent
• The increase was due to -12,185sqm of net absorption

Future supply:

• 19,085sqm of space is due to come online in 2021
• No space is due to be completed in 2022
• 14,000sqm of space is due to come online from 2023 onwards

 

Key market indicators, North Shore (aggregate)

Grade	Vacancy, Jan 21 (%)	Vacancy, Jul 20 (%)	Net absorption, 6 months to Jan 21 (sqm)	Net absorption, 12 months to Jan 21 (sqm)
Premium	17.7%	0.0%	34,662	37,519
A	13.8%	6.9%	29,429	25,896
B	24.1%	11.3%	-69,856	-85,914
C	10.1%	7.3%	-10,493	-17,260
D	11.0%	9.9%	-248	-28
Total	16.9%	8.4%	-16,6	-39,787

 

Key market indicators, North Shore (by locale)

Locale	Vacancy, Jan 21 (%)	Vacancy, Jul 20 (%)	Net absorption, 6 months to Jan 21 (sqm)	Net absorption, 12 months to Jan 21 (sqm)
North Sydney	19.5%	8.0%	-16,230	-15,605
Crows Nest / St Leonards	12.8%	9.0%	11,909	1,933
Chatswood	13.0%	8.8%	-12,185	-26,115

 

Future supply, North Shore (by locale)

	Future supply by year (sqm)
Locale	2021	2022	2023+	Mooted
North Sydney	0	0	11,000	0
Crows Nest / St Leonards	19,085	0	0	18,300
Chatswood	0	0	3000	0
Total North Shore	19,085	0	14,000	18,300