Smaller leases drive Sydney CBD commercial market recovery

The outlook for the Sydney CBD office leasing market is strong, with enquiries in the April quarter more than four times the level recorded from June to August 2010, according to the latest CBRE and Property Daily Sydney CBD Leasing Market Report.

Jenine Cranston, CBRE senior director of office services, says the market has rebounded, with enquiries for leasing adding up to more than 200,000 square metres in the first quarter of 2011.

Cranston says the strongest growth was evident at the smaller end of the market, in the 100-square-metre to 500-square-metre range.

“There has also been significant growth in larger enquiries for over 3,000 square metre of space, with a 50% + improvement in the level of enquiry by square metres and a more than 70% improvement in the number of enquiries since quarter one, 2010,” she says

As a result, CBRE forecasts that the increase in new enquiries will translate into a higher level of lease signings over the remainder of 2011.

In February, Rob Dickins, Savills national head of office leasing, forecast continued recovery of the Sydney CBD office market on the back of a strong finish to 2010.

Dickins says confidence and the ability to take advantage of generous incentives drove a number of smaller financial and professional services firms to be particularly active in 2010.

The positive outlook comes on the back of 20 new leases being signed in April, compared with just 17 for the first three months of the year. The 20 leases signed in April represent the most activity for a single month since November 2010 and only the third time since August 2008 that 20 or more leases have been signed in a calendar month.

The average size of CBD leases remains low, with the average for April at 912 square metres, compared with the average size of 1,312 square metres in March. The year to date has the lowest average lease size since October 2009.

During the year to April 2011, 24 deals of more than 3,000 square metres were signed, accounting for 144,124 square metres of space. Conversely, 93 leases of less than 1,000 sqm were signed over the period, accounting for just 36,310 square metres.

The finance and insurance sector remains the main driver of demand, accounting for more than a third of gross absorption during the year, with public administration and community services and business services the next biggest contributors.

Major leases signed recently include merged stockbroking group Bell Potter and Southern Cross Equities signing up for 3,000 square metres (floors 37 and 38) of the nearly completed 1 Bligh Street Tower, Sydney.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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