Vacancy Rates Crash to Record Low
NSW Planning Minister Pru Goward will be among nearly 300 guests at tomorrow’s Hunter Outlook ’15 event to hear that demand for office space in Newcastle’s CBD is among the strongest in Australia.
Hunter Outlook is the annual event where The Property Council of Australia’s latest Australian Office Market Report is released to the corporate world.
NSW Regional Director – Hunter, Andrew Fletcher, said the report shows that positive demand in Newcastle meant the city now has one of the lowest overall vacancy rates in Australia.
“The CBD has seen around 11,000sqm of office space come online over the past twelve months and well over 90% of that has already been taken up.”
“A Grade office space is now at an absolute premium in the city and vacancy rates for this category have crashed to around 2.7%”
“That type of figure is unprecedented for Newcastle and is lower than most capital cities.”
“The next major boost to supply will occur from 2017 onwards.”
Mr Fletcher said the research showed the changing face of Newcastle’s CBD and a local economy switching to a focus on services and innovation.
“In the East End in particular, we’ve seen pockets of run down office space redeveloped into stylish studio apartments and boutique student accommodation.”
“As the city reconnects with the waterfront and light rail becomes a reality, the demand for this type of inner city housing will increase and we’ll see the commercial hub march west towards the new transport interchange at Wickham.
“That means a huge boost for job creation and private investment in the region.”
Mr Fletcher said that along with full details of the Office Market Report, Hunter Outlook ’15 will include expert analysis on tourism, industrial and residential property markets across the region.
“Generally speaking, property markets throughout the Hunter are in a buoyant mood.”
As annual visitor spending in the Hunter has topped $2 billion, tourism assets from Lake Macquarie to Pokolbin have become more attractive to cashed-up investors.
“Wine Country has always been a magnet for Sydneysiders looking to escape the rat race and the planned $400 million expansion of Vintage Estate will cater to that market”.
“More recently there has been serious offshore investment in the Hunter Valley’s tourism property market.”
Mr Fletcher cited the sale of Chateau Elan and Vintage Golf Club to a subsidiary of Chinese insurance heavy weight Sunshine Insurance Group, which is nearing completion.
“China is the fastest growing inbound tourism market and this investment group will now have a regional tourism asset to leverage their recent $465 million acquisition of Sydney’s landmark hotel, Sheraton on the Park.”
In the industrial sector, Mr Fletcher said there had been a seismic shift since the Hunter Expressway had opened.
“We’ve seen a move away from the construction of traditional warehouses in industrial parks to the development of state-of-the-art logistics facilities to take advantage of new transport infrastructure.”
The Hunter Expressway has also had a massive impact on residential markets by closing the gap between metropolitan areas and the coal fields.
“Maitland continues to be a boom area for new land releases, the first of what will ultimately be 7,0 new dwellings at Huntlee have been sold and other subdivisions along the transport corridor are expected to be winners in the long term.”
But Mr Fletcher warned it was not all plain sailing ahead. He said the biggest risk to maintaining the Hunter’s current trajectory is the dramatic decline in housing affordability.
“Supply has simply not kept pace with demand over the past decade and the cumulative shortfall is now approaching 15,000 homes.”
“We need a Regional Growth Plan with an embedded infrastructure delivery schedule that spans the next 20 years and a smarter approach to developer contributions.”
“Those policy settings will give investors the confidence to undertake large scale greenfield residential development on the urban fringes and further up the valley.”
MEDIA ENQUIRIES – ANDREW FLETCHER – 0407 410 017
Analysis & commentary, Newcastle, January 2015
Note – analysis is the year to January 15
Headline comments:
- Total vacancy decreased in the Newcastle market over the year to January 2015
- This was due to positive demand
- The A Grade segment is tight while the other grades have much higher vacancy
- There is no space due to come online in 2016
Vacancy analysis:
- Total vacancy decreased from 9.2 percent to 8.7 percent in the year to January 2015
- The decrease was due to 10,238sqm of net absorption, the highest since January 2009
- 11,090sqm of space was added over the period while 1,240sqm was withdrawn
- The A Grade segment is tight, while the other grades all have vacancy above 9 percent
Future supply:
- 3,700sqm of space is due to come online in 2015
- This will be followed by 7,0sqm from 2017 onwards
- 9,600sqm of space is mooted
Grade |
Vacancy, Jan 15 (%) |
Vacancy, Jan 14 (%) |
Net absorption, 12 months to Jan 15 (sq m) |
Net absorption, 12 months to Jan 14 (sq m) |
A |
2.7 |
5.0 |
9,120 |
-1,293 |
B |
13.3 |
7.0 |
-5,347 |
-2,980 |
C |
9.8 |
16.5 |
7,541 |
-4,209 |
D |
14.1 |
10.2 |
-1,076 |
1,379 |
Total |
8.7 |
9.2 |
10,238 |
-7,103 |