A look at the Sydney Commercial real estate market
The Sydney CBD is Australia’s largest commercial real estate market. Renting
an office space in the Sydney CBD places your business in the epicentre of one
of the Asia Pacific region’s major financial and commercial hubs. The area
which extends from Circular Quay back to Golburn Street, 3kms to the south, is
comprised of six separate precincts. Starting
at Circular Quay and moving clockwise they are CBD Core, Mid-town, Southern
CBD, Western Corridor, Barangaroo and The Rocks.
With fabulous water views the CBD Core is home to prestigious global
investment banks whilst Martin Place is experiencing a tech boom. Legal firms
congregate in the Mid town precinct and Barangaroo is set to become a mecca for
the financial services industry.
Whilst the Sydney CBD is still dominated by traditional banking,
financial services, legal firms and the government sector, the burgeoning IT
industry is rapidly increasing its foothold.
The Sydney CBD office market
is currently in a state of flux. Rental vacancies have fallen in recent months and
property analysts expect supply to remain tight over the next few years despite
major new developments opening up in Barangaroo. Net rental rates in the Sydney
CBD are currently in the ball park of;
Buildings - $600 to $900 per square metre per annum
Buildings - $450 to $600 per square metre per annum
Property professionals point
to a modest uptick in rental rates due to supply side constraints.
At the same time the demand
profile for commercial real estate is changing. Typically tenants are looking
for spaces between 1,200 sqm and 2,000 sqm. However there has been a notable
trend towards smaller offices and shorter leases.
Emerging IT and business
services companies require smaller more nimble spaces compared with the
entrenched banking and legal sector. The new guard are also looking for a
different type of office environment in order to attract and retain the best
talent. Issues such as work/life balance and building sustainability are of
increasing importance to the next generation of CBD tenants. These businesses
are looking for facilities like bike racks and showers, natural lighting, outdoor
areas and green spaces as well as contemporary fit outs. Consequently leases
under 300 sqm in buildings with great facilities are hot right now. Landlords
are responding by subdividing larger vacancies and refurbishing lower grade
buildings in order to attract the creative industries. Co-working arrangements and
serviced offices are taking off in a big way in the Sydney CBD, reflecting
Savills – Briefing Sydney CBD Office – July 2015, P6.
International, CBD Office – Second Half 2015 – New Breed of Tenants, P13