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      Commercial Real Estate and Office Rental Market – Parramatta

      Trends in the Parramatta Commercial Real Estate and Office Rental Market

      Parramatta is located 23kms to the west of the Sydney CBD on the banks of a Parramatta River. As Australia’s oldest inland settlement Parramatta has always played a significant role in the NSW economy. In recent decades the suburb has flourished as a commercial precinct. In fact Parramatta is now the 6th largest central business district in the county and is regarded as the economic epicentre of greater Sydney.[1]

      Parramatta is a major transport hub having reaped the benefits of upgrades to the Railway Station and the construction of a new bus interchange. It is also linked to the Sydney CBD by ferry with the River Cat providing a pleasant journey between the two centres.

      Parramatta’s connectivity to the rest of Sydney is set to improve further with multi-billion dollar developments such as the North West Rail and WestConnex in the State Government pipeline.[2]

      Since 2000 Parramatta’s office market has benefitted from relocation of a number of Government agencies including NSW Police Headquarters and Sydney Water. At the same time, financial services firms have arrived in droves and the area now hosts an estimated 20% of Australia’s Top 500 companies[3] Commonwealth Bank, Deloittes and KPMG along with engineering giant GHD are among Parramatta’s corporate A-list.

      The legal profession too has a strong presence in Parramatta. The western end of the CBD is referred to as the Justice Precinct. It is home to a number of institutions like the Federal Magistrates Court, the Family Court of Australia, NSW Attorney General and the Legal Aid Commission[4].

      Commercial real estate in Parramatta is tightly held and its office market is one of the best performing in Sydney. As at June 2015 the head line vacancy rate was 7.4% with the A-Grade category close to fully occupied at 2.4%[5] Colliers believe that the figure has reduced further since then with a number of deals being finalised in early FY16.[6]

      Leasing an office in Parramatta is a difficult task at the moment. Supply is extremely limited. Larger vacancies (over 2,000 sqm) are practically non-existent and no new space is scheduled for release until the 4th quarter of 2016.[7] Availability is currently restricted to smaller tenancies spread throughout a number of buildings.[8]

      The supply squeeze caused rents to leap by as much as 5% over the past financial year. According to Savills net face rents now typically fall within the following range.

      A Grade:                                                                      $380 to $460 per square meter per annum

      Secondary Grade:                                                 $280 to $360 per square meter per annum[9]

      Parramatta is poised to undergo further transformation with the planned $2b redevelopment of Parramatta Square. The Parramatta Council has ambitions to turn its municipality into a true alternative to the Sydney CBD.

      As part of the project, the Council recently closed a $1.2b deal with Walker Corp to construct three sky- scrapers - specifically a 68 storey residential tower and two 53 storey commercial buildings comprised mainly of A-grade stock[10]. Colliers estimate that the new towers will add around 140,000 sqm of office floor space to the market.[11]

      Walker Corp chairman Lang Walker describes the project as “great opportunity to secure major government tenants and private sector tenants, some of which have already expressed interest in securing office space at Parramatta Square.”[12]

      Given the buoyant market fundamentals, it is not surprising that Parramatta is attracting significant investor attention. According to Colliers $500m flooded into Parramatta during FY15 with major players like Centuria, Eureka, VennCapp Real Estate and GDI Property becoming stakeholders in the area. [13]

      Most analysts expect that Parramatta’s robust development pipeline will be matched with ongoing tenant demand. Parramatta offers facilities and amenities to rival the Sydney CBD without the premium price tag. In addition residential rezoning in other suburban business districts like Epping, Burwood, Ashfield and St Leonards could result in Parramatta being viewed by businesses as a cost effective alternative.[14]

      Investing in commercial real estate in Parramatta is a great strategy for prospective tenants and land lords alike.

      [1] Wikipedia  
      [4] Wikipedia
      [5] Savills Briefing – Parramatta Office October 2015, P5
      [6] Colliers – Metro Office – Second Half 2015 – Metro Migration, P15
      [7] Savills Briefing – Parramatta Office October 2015, P5  
      [8] Colliers – Metro Office – Second Half 2015 – Metro Migration, P15
      [9] Savills Briefing – Parramatta Office October 2015, P4  
      [11]  Colliers – Metro Office – Second Half 2015 – Metro Migration, P15  
      [13] Colliers – Metro Office – Second Half 2015 – Metro Migration, P6  
      [14] Savills Briefing – Parramatta Office October 2015, P8  
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