Sydney CBD office market stabilises

The Sydney CBD commercial office market has stabilised after a period of weak demand and rising vacancies, according to the Property Council of Australia’s latest Office Market Report.

The vacancy rate across the CBD fell from 9.7 percent to 8.2 percent in the six months to July 2012, driven by a combination of demand and stock withdrawals.

“Demand has returned to normal levels, with net absorption totalling 45,309 sqm over the six months to July,” Property Council NSW Executive Director Glenn Byres says.

“Matched with high stock withdrawals of 42,237 sqm, the vacancy rate has dropped back to a level last seen 18 months ago.

“It is also worth noting that the majority of Sydney’s supply pipeline over the coming years has pre-commitments attached, including Barangaroo.”

The vacancy rate for Premium floor space rose from 7.4 percent to 7.8 percent, with 2450 sqm in supply additions compounded by net absorption of -551 sqm.

The combination of 21,315 sqm of stock withdrawal and 18,021 sqm of net absorption culled the A Grade vacancy rate from 9.2 percent to 7.5 percent.

A similar combination of factors also saw a cut in the B Grade vacancy rate from 10.1 percent to 7.8 percent and C Grade from 13.1 percent to 12.2 percent.

A drop in the D Grade vacancy rate from 8.4 percent to 7.7 percent was solely driven by net absorption of 1363 sqm.

Mr Byres says 48,959 sqm of new stock is due to enter the market before the end of 2012 with a further 110,849 sqm projected to come online next year. 

Headline comments:

• Sydney CBD posted a decrease in vacancy in the six months to July 2012
• This was due to demand and withdrawals
• Only the Premium Grade segment experienced a vacancy increase over the period
• There is a steady stream of space due to come online over the next 18 months

Vacancy analysis:

• Vacancy in the Sydney CBD office market decreased from 9.7 percent to 8.2 percent
• This was due to net absorption of 45,309 sqm and withdrawals of 42,237 sqm
• 13,225 sqm of space was added over the period

Premium:

• Vacancy increased from 7.4 percent to 7.8 percent
• This was due to 2,450 sqm of supply additions
• -551 sqm of demand was recorded over the period

A Grade:

• Vacancy decreased from 9.2 percent to 7.5 percent
• This was due to 21,315 sqm of withdrawals and 18,021 sqm of net absorption
• 7500 sqm of space was added to the market over the period

B Grade:

• Vacancy decreased from 10.1 percent to 7.8 percent over the period
• This was due to 21,093 sqm of net absorption and 19,662 sqm of withdrawals
• 2397 sqm of space was added to the market over the period

C Grade:

• Vacancy decreased from 13.1 percent to 12.2 percent
• This was due to 5384 sqm of net absorption and 1260 sqm of withdrawals
• 878 sqm of space was added to the market over the period

D Grade:

• D Grade vacancy decreased from 8.4 percent to 7.7 percent
• This was solely due to demand of 1363 sqm

Future supply:

• 48,959 sqm of new stock is due to enter the market in the second half of 2012 with 34 percent pre-commitment
• 110,849 sqm of projects are scheduled to be completed in 2013 with 59 percent pre-commitment
• 317,160 sqm is due to come online from 2014 onwards
• A total of 180,391 sqm of space is mooted

Key market indicators, Sydney CBD (aggregate)

Contacts:

Glenn Byres,
NSW Executive Director,
02 9033 1904 or 0419 695 435

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

For full analysis and coverage, visit the dedicated website: www.officemarketreport.com.au