Surging demand for office space in Melbourne and Sydney CBD districts has tightened vacancy rates and put prices on an upward trajectory, leaving many local and interstate commercial property investors looking to alternative regional areas.
For NSW, where the heat is being felt most, well facilitated regional cities that can offer businesses all the investment fundamentals of the city, out of the city, are becoming sought after.
Wollongong, the seaside city of the Illawarra region, 82km south of Sydney, has become the target of a real shift in commercial investing.
“Increasingly we are seeing very strong interest from CBD buyers, particularly Melbourne and Sydney, to Wollongong.The attraction is greater affordability without compromising on the fundamentals of their investment,” says Travis Machan, MMJ Real Estate Wollongong.
According to the Property Council of Australia’s report, Wollongong City on the Move, Wollongong is creating a greater platform as the business centre of the region. It currently generates 63% of the Illawarra’s Gross Regional Product (GRP), with this projected to grow between $14 and $16 billion by 2022. The CBD is earmarked to accommodate a minimum 10,000 new jobs and 6,000 more residents by 2031.
“These are the fundamentals giving confidence to investors in this market. We recently sold a large commercial building of around 5170 square metres at 67-71 King Street, Warrawong, bought by a consortium comprising local and Sydney investors for just under $8 million.
“The sale of buildings this size and this price is indicative of the shift we are seeing. Without a doubt, this region is set to become a real contender as a prime business hub in the coming years,” said Mr Machan.
Demand for office space in the CBD of Melbourne and Sydney was more than double historical averages in the six months to July 2015, with vacancy rates falling from 7.4 to 6.3 percent.
Confidence in office markets is being led mainly by NSW, where much stronger expectations for capital and rental growth are mirroring the improvements in demand for office space.Positive returns are forecast for the next 1-2 years.
“There has been a significant surge of activity with true A-grade office leases being taken up in Wollongong. The significant increase in mixed use developments offering broader retail and commercial opportunities with quality facilities for their occupiers has been very positive.
“Wollongong is on the radar for many buyers, and recent significant infrastructure developments within the city will only cement its place there. It’s the city to watch as we increasingly follow this real shift in commercial office investing,” said Mr Machan.