Parramatta office leasing up 81% in a year: Savills
Take-up of office space in Parramatta, often dubbed “Sydney’s second CBD”, increased by 81% for the 12 months to June 2011, according to research by Savills.
The market has now “passed through the trough in the cycle” and is expected to stabilise in the coming 12 months.
The Parramatta CBD – the fifth-largest suburban office centre in Australia, with 685,171 square metres of stock as at June 2011 – is expected to benefit from a strong recovery in the Sydney CBD market, though “ confidence and sentiment remain the biggest drivers”.
In quality grade terms, approximately 34% of office stock is A grade, with B and C grade space comprising approximately 45% of the market.
In the 12 months to June 2011, Savills identified 22,492 square metres of leases in the Parramatta market, with demand for space from the finance and insurance sector accounting for 92% of the stock, or 20,763 square metres.
While this is a big jump on 2010 figures, it is still well down on the five-year average of 52,665 square metres.
The overall vacancy rate in Parramatta decreased to 9.3% in the 12 months to June 2011, according to the latest figures released by the Property Council of Australia, with B-grade stock vacancies falling from 12.4% to 5.6%.
Net A-grade rents in Parramatta typically cost between $270 and $355 per square metre per annum, and B-grade buildings lease for between $200 and $245 per square metre per annum.
February was a particurlarly strong month for leasing activity, with insurer QBE and professional services business Deloitte pre-committing to 18,000 square metres of space at Eclipse Tower, a 19-storey office tower to be built at 60 Station Street.
The 25,000-square-metre building is being developed by Leighton Properties and UK-based Grosvenor and is due for completion in 2012.
According to Savills, these pre-commitments are a positive sign for the Parramatta office market; “however, it remains to be seen if this will have any long term effect on rental levels within the locality”.
Looking further ahead, there are currently three projects totalling more than 85,000 square metres of mooted new stock in the supply pipeline. However, Savills says none of these projects will proceed without significant levels of pre-commitment.