St Leonards is still high on the radar of new existing office users, with close to 10,000sqm of lease deals negotiated in recent months.
While much of the recent focus has been on St Leonards' residential potential, a CBRE review highlights continued demand from both new and existing office tenants.
Recent deals include a 1,800sqm lease involving Carloans.com.au (a part of Eclipx Group) and a 4,164sqm commitment from Primary Health Care. A number of large lease renewals have also been finalised to tenant such as Ramsay Healthcare (2,500sqm) and Next Media (1,800sqm).
CBRE Office Services Director Stefan Perkowski said the focus was on well positioned, quality buildings with a high level of tenant amenity.
“We’re continuing to see genuine buy-in from occupiers targeting St Leonards. Tenants that have been displaced as a result of residential conversions are taking the opportunity to remain in the area and upgrade their accommodation. We’ve also seen a number of new tenants enter the market to capitalise on the rental differential between St Leonards and nearby markets such as North Sydney,” Mr Perkowski said.
Stockland has been one beneficiary of the recent tenant activity, having leased circa 5,000sqm of available space in 601 Pacific Highway over the past 12 months. The building is now 100% occupied, with one of the newest tenants being Carloans.com.au, a part of Eclipx Group.
The finance broker, who was represented by Andrew Kane from CBRE GWS, will relocate to the building next month from Macquarie Park after striking a five-year lease deal over two whole floors.
Challenger has also capitalised on the current tenant interest, after signing medical group Primary Health Care to The Forum at 203 Pacific Highway. That building is now also 100% committed.
Mr Perkowski said a number of major lease renewals had also been inked in recent months by tenants who had conducted wide ranging reviews of alternate locations. These include Next Media at Space 207 and Ramsay Healthcare at 154 Pacific Highway.
“There is an inbuilt culture among many St Leonards tenants who like the work/life balance that the location affords, if they have a high proportion of staff living on the north shore,” Mr Perkowski said.
“The rental differential is another draw card, with rents for equivalent A-grade buildings some $100-$150/sqm below that of North Sydney.”
Withdrawals of stock for residential conversion have been another boon for existing office landlords. CBRE research highlights that at least 36,000sqm of stock is likely to be withdrawn over the next four years, representing 10.3% of the current market.
This involves five secondary buildings: 18-20 Atchison Street (1,818sqm); 472 Pacific Highway (11,728sqm); 504 Pacific Highway (11,083sqm) and 33 Herbert Street (6,065sqm).
Numerous additional owners remain in talks with council in regards to development applications for potential conversions, which could remove another 29,000sqm of stock.
As a result of conversions, CBRE’s current forecast is for the St Leonards vacancy to dip as low as 4.5% in 2017.
“As the overall market size declines, we expect that the occupier market will continue to tighten, shoring up occupancy in remaining buildings and placing landlords in a more favourable position,” Mr Perkowski said.
This has underpinned investor interest in existing assets such as 201 Pacific Highway and more recently 207 Pacific Highway.