Sydney records lowest vacancy rate since 2008 but demand subdued

The latest Property Council Office Market Report has shown the lowest vacancy rate for Sydney CBD since January 2008, demonstrating the continued growth and strength of the commercial office market in Sydney.

The Sydney CBD vacancy rate dropped from 4.1 per cent to 3.7 per cent in the six months to July 2019 due to withdrawal of stock from the market and is the second lowest capital city vacancy rate in the country just behind Melbourne CBD at 3.3 per cent.  

There is some office space in the pipeline for Sydney over the next year with another 63,000 square metres coming online by the end of 2019 and over 131,000 square metres entering the market in 2020.

“With the lowest vacancy rate since 2008, space is again tight in the CBD although demand is subdued,” Property Council of Australia NSW Executive Director Jane Fitzgerald said today.

Key market indicators, Sydney CBD (aggregate)

Grade

Vacancy,

Jul 19 (%)

Vacancy,

Jan 19 (%)

Net absorption, 6 months to

Jul 19 (sqm)

Net absorption, 12 months to

Jul 19 (sqm)

Premium

2.7

3.8

13,004

28,360

A

3.2

3.6

4,114

5,086

B

4.1

4.5

-9,142

-17,312

C

6.2

4.8

-9,447

-13,721

D

5.9

5.8

-2,152

-5,588

Total

3.7

4.1

-3,623

-3,175

 

“There is no doubt that further political certainty following the NSW and Federal elections, and a strong NSW Budget 2019-20 with record investment in infrastructure have all had a positive impact on the property industry and should help to underpin a solid outlook for future growth.

“However, the office market in the CBD needs a release valve – low vacancy and rising rents will increasingly impact our competitiveness as a global city with Melbourne benefitting, as they add more supply over the next four years. 

 “We need a finalized planning regime for our CBD – one that encourages further supply and investment through defined and transparent development controls throughout our CBD to provide certainty to industry.

“We have had a Draft Central Sydney Planning Strategy for three years – it’s time to resolve the key issues and finalise this document,” Ms Fitzgerald concluded.

To view select Office Market Report data series, visit the Property Council’s Data Room

Media contact:  William Power | M 0429 210 982 |   E wpower@propertycouncil.com.au

 

Office Market Report July 2019

Analysis – Sydney CBD market

 

Headline comments:

  • Sydney CBD vacancy decreased over the period
  • The decrease was due to withdrawals
  • Overall demand was slightly negative
  • Negative demand was recorded in the B, C and D Grade segments
  • The lower grades of space recorded vacancy increases
  • There is a steady stream of space due to come online over the short to medium term

 

Vacancy analysis:

  • Vacancy in the Sydney CBD office market decreased from 4.1 percent to 3.7 percent
  • This was due to 32,039sqm of withdrawals
  • Demand was slightly negative with -3,623sqm of net absorption recorded
  • 8,639sqm of space was added over the period

 

Premium:

  • Vacancy decreased from 3.8 percent to 2.7 percent
  • This was due to 13,004sqm of net absorption

 

A Grade:

  • Vacancy decreased from 3.6 percent to 3.2 percent
  • This was due to 7,843sqm of withdrawals and 4,114sqm of net absorption

 

B Grade:

  • Vacancy decreased from 4.5 percent to 4.1 percent over the period
  • This was due to 18,848sqm of withdrawals
  • Net absorption over the period was -9,142sqm

 

C Grade:

  • Vacancy increased from 4.8 percent to 6.2 percent
  • This was due to -9,447sqm of net absorption

 

D Grade:

  • Vacancy increased from 5.8 percent to 5.9 percent
  • This was due to -2,152sqm of net absorption

 

Future supply:

  • 63,115sqm of new stock is due to enter the market in the second half of 2019
  • This will be followed by 131,518sqm in 2020
  • 204,082sqm is due to come online from 2020 onwards
  • A total of 100,000sqm of space is mooted