Luke Crawford, Knight Frank’s Analyst for Research and Consulting
said, “With business conditions starting to improve in NSW, the early stages of improving leasing activity are anticipated to steadily gain some momentum into 2015.
“Recent lease deals in North Sydney and North Ryde are expected to underpin positive net absorption over the next two years”.
“A steady improvement in full-time employment growth is central to this outlook.
“Over the past 12 months, just over 90 per cent of employment growth in NSW has come from full-time jobs, which is a sign of firms making longer term decisions and provides a solid base for growth in tenant demand”.
The prime leasing market in North Sydney is once again continuing to tighten, with vacancies reducing from 5.1 per cent to 4.7 per cent in 2014.
, Knight Frank’s Director, Office Leasing, North Shore, said the strong rental outperformance during the last three years in the North Sydney market, particularly when compared to the CBD has resulted in some tenant leakage to the CBD.
“A number of incoming tenants such as Jemena (5,600 square metres) Sony (2,400 square metres) and Boral (1,900 square metres) will offset some departures and maintain the relatively tight prime market”.
“A lack of supply over the next two years is expected to support the tight outlook within the prime market while helping sustain current rates of rental growth.
“The completion of 177 Pacific Highway, North Sydney during 2016 is expected to be the only addition to supply over the next two years, and given that almost 80 per cent is pre-committed to Leighton’s, its impact on the North Sydney market will be minimal,” he said.
Macquarie Park/North Ryde
“We are seeing a particularly strong turnaround in Macquarie Park/North Ryde in recent months on the back of several large leasing deals.
Vacancy rates deteriorated from 7.1 per cent to 11.2 per cent over the two years to July 2014; however in light of the recent deals, we are now forecasting vacancy rates to reduce to around 8.5 per cent by July 2016,” Mr Ruberto said.
“Positive net absorption over the next 12-24 months is expected to stem from large lease deals including Ricoh 6,000 metres square at 2 Richardson Place and Metcash taking 9,000 square metres at 1 Thomas Holt Drive.
“From an investment perspective, the sales momentum experienced during 2013 has continued into 2014 with several large sales recorded in recent months.
“The bulk of sales activity remains concentrated in the North Sydney market with YTD 2014 commercial sales ($10m +) totalling $767 million, which is over double the five year average,” Mr Crawford said.
Knight Frank’s Director, Commercial Sales, Tyler Talbot
said foreign capital continues to underpin investment activity, accounting for around 50 per cent of sales across the North Shore and North Ryde markets since the beginning of 2014.
“This competitive environment, coupled with limited stock availability has resulted in yield compression for both prime and secondary assets across the North Shore/North Ryde market.
“With demand from both domestic and global capital expected to remain high, it is likely that buyer depth will remain solid, placing further downward pressure on yields,” he said.