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Major Development in Parramatta Triggers New Retail Property Trends

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Home to the fourth largest metropolitan office market in Australia and boasting a zero per cent vacancy rate for A grade office supply, Parramatta has gone through massive revitalisation in recent years.

The major redevelopment is a boon for Parramatta's evolving retail property market as traditional ownership and leasing patterns make way for new trends influenced by the significant revitalisation of the Western Sydney city.

Capital value ranges are tightening, national franchise brands are focusing on Parramatta as a viable location for new tenancies and a different type of investor is competing with the local long-term owners who once dominated the market, according to Ray White Commercial research.

There is currently over 125,000 square metres of potential new retail space destined to enter the Parramatta market over the next few years, to be developed on smaller strata lots on ground floor level within both commercial and residential developments across the Parramatta CBD.

The biggest of these retail contributors is expected to be the $200 million Westfield Parramatta and the anticipated retail offerings as part of the new $2 billion Parramatta Square development.

Low interest rates and rising residential property prices have drawn many first-time investors to Parramatta as they look to diversify their investments, the research found — particularly in the sub-$1.5 million bracket. However, more experienced investors in this market continue to see value in Parramatta retail seeking investment up to $50 million.

[Related reading: Parramatta’s Office Market Struggles to Keep Up with Demand]Ray White Commercial NSW associate director Joseph Assaf said Parramatta’s rapid growth and development potential could also be a challenge for retail expansion.

Larger retail opportunities are limited because the possibility of redevelopment in Parramatta's CBD means many owners do not want to lock in leases longer than five years or without a demolition clause."

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Proposal for a civic and community building in the $2 billion Parramatta Square urban redevelopment.

Ray White Commercial head of research Vanessa Rader said the ongoing development across the CBD has caused investors to have a greater sense of urgency resulting in reducing yields to this level.

[Related reading: GPT Group’s ‘Northern Gateway’ to Parramatta]“With this revitalisation of the Parramatta CBD we have seen many older-type assets tidied up and new, more secure tenants including national brands looking to Parramatta as a viable retail location," she said.

"Average capital values for retail assets in Parramatta have increased in the past three years after the post-GFC period from 2008-2014 when values rose 3.21 per cent per annum.

"Capital values ranged widely due to the vast quality in assets, from long-held properties that had seen limited capital expenditure at the lower end to more modern strata retail assets achieving higher values.

“This limited volume of sales during these periods have also seen a tightening in the value range, with the lower values seeing a significant increase, setting a new minimum benchmark in values,” she said.

Major development projects have also driven greater levels of investment in the Parramatta area, including the light rail, Parramatta Square, Civic Link and the revitalisation of the Parramatta River.

Feature image: Renderings of the South Quarter development in Parramatta.

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Article originally posted at: https://theurbandeveloper.com/articles/new-trends-bring-parramatta-retail-property-market