Investors returning to North Sydney offices: CBRE

A combination of falling vacancy rates as well as positive rental growth will attract investor capital into North Sydney offices for the remainder of 2011 and 2012, according to a new report by CBRE. 

The commercial district, separated from the Sydney CBD by the Harbour Bridge, attracted four major transactions totaling $275.3 million from investors in the year until September 2011. 

CBRE senior director Simon Fenn says the deals demonstrated improved market sentiment and equated to the highest level of sales volume for the north shore market since the 12 months to December 2008. 

Major transactions have included US-based Pramerica’s acquisition of a 50% share in The Ark for $113.5 million and the Australian Catholic University acquiring NCR House for $57.3 million.

Fenn says both investor and owner-occupier interest for north shore commercial assets has increased. 

Further evidence of improving market sentiment is the number of commercial assets coming to market in the second half of 2011, most notably Northpoint at 100 Miller Street, North Sydney, which is being formally marketed for sale for the first time.” 

Alongside increasing investor appetite for North Sydney offices, leasing activity has also picked up. 

CBRE senior director Tom Bartlett said the rekindling of the leasing market coupled with a current lack of new supply would ensure that the North Sydney office market dipped below 9.0% vacancy by the end of this year. 

“With vacancy in the CBD forecast to continue contracting, North Sydney is once again set to benefit from the overflow of tenants given the market’s comparable location,” he says. 

“Tenant demand has strengthened significantly in 2011 with a number of major lease deals evidencing the market recovery.” 

Among the larger North Sydney deals of the year, Gallaher Bassett re-committed to 3,920 square metres at 201 Miller Street, Seek Limited have taken over 2,721 square metres at 80 Pacific Highway and Tenex have moved into the top two floors of The Ark comprising 2,260 square metres. 

In addition, Cardno has relocated its NSW headquarters from Gordon to The Forum at 203 Pacific Highway, St Leonards, taking up the top four floors. 

Total vacancy across the north shore continued to trend downwards in 2011, with North Sydney and neighbouring Crows Nest/St Leonards recording vacancy rates of 9.2% and 12.5% respectively as at July 2011. 

CBRE forecasts indicated the total vacancy on the north shore will average 8.6% between 2011 and 2015. 

According CBRE research analyst Alex Bedrossian there are a number of potential developments in the pipeline which would reinforce the north shore’s position as the main commercial alternative to the CBD. 

There were currently three major development sites in North Sydney that could potentially deliver over 100,000 square metres of new office space over the next five years. 

“While development activity in Chatswood is expected to remain limited as a result of higher vacancy rates, a 31,000 square metres development in Crows Nest / St Leonards is also set for completion by 2015,” Bedrossian says.

Picture courtsey of Tourism New South Wales