Sydney office vacancy yet to peak

Sydney office vacancy yet to peakDeutsche Bank research reveals Sydney’s CBD office market will reach peak vacancy rates up to 13 per cent in 2016″a 2.4 per cent increase on the forecast for 2015.The revised forecast reflects the growth in supply that is expected to come when the first stage of the Barangaroo office complex is completed in late 2016. According to reports in the Australian Financial Review, Deutsche Bank analysts expect that 2015-16 will see a sizeable increase in supply in the CBD. However tenants that have pre-committed to the new space coming on the market in 2016 are downsizing, with the report stating they will use 25,000 sqm, or 11 per cent, less space than they currently occupy. The lack of tenant interest is due to existing commitments to other developments scheduled for delivery in December 2016, such as the office tower at Barangaroo.Other findings from the Deutsche Bank report reveal net effective rents are forecast to decline by an average 5.2 per cent per annum to 2016. After this period, rents will rise at an annual 9.5 per cent over the next two years.Meanwhile, the analysts say key risks for AREIT pricing will include changes to interest rates and the potential for development and leasing shortfalls.