Parramatta has downward pressure on office vacancy rate: Savills

Savills, in the 12 months to September 2014, identified 29,989 square metres of leases in the Parramatta market.

This was up 55% on the 12 months prior, and up on the five year average (22,860 square metres).

Parramatta office leases to September 2014

Net absorption of 1,737 square metres was recorded in the Parramatta market in the 12 months to June 2014.

With only 675 square metres of A Grade available space according to the latest Property Council of Australia (PCA) Office Market Report, Savills says any future demand for prime buildings will likely be soaked up by well positioned secondary grade assets in the short-term, as there are no new major developments under construction.

This is forecast to continue placing downward pressure on the overall vacancy rate in the Parramatta office market and further reinforcing the need for development of new space in the market.

Net face rents in Parramatta as at September 2014 typically range between $350 and $450 per square metre per annum for A Grade buildings, and between $265 and $340 per square metre per annum for secondary grade buildings.

The average A Grade face rent in Parramatta is $400 per square metre per annum, a 7% increase over the last 12 months.

As a result of the University of Western Sydney committing to 1PSQ, Government and Community was the dominant sector in the Parramatta office market in the last 12 months, accounting for 95% of the stock, or 28,623 square metres of the 29,989 square metres leased. Similarly, the largest number of transactions was through the Government and Community sector (four transactions).

The latest PCA Office Market Report shows that the overall vacancy rate in Parramatta decreased by 0.8 percentage points over the 12 months to June 2014 and currently sits at 6.7%. Parramatta vacancy has experienced a downward trend since July 2010, where vacancy was as high as 10.8%.

Over the last 12 months, A Grade vacancy in Parramatta fell by 2.2 percentage points to an all time low of just 0.2% (675 square metres). This reflects a decline of approximately 5,539 square metres of available space over the period. However, the PCA recorded an increase of 18,600 square metres in total A Grade stock due to a regrade of buildings over the same period. B Grade vacancy in Parramatta recorded an increase from 5.3 % to 9.5% over the last 12 months.

With no new office supply expected in Parramatta until 2016, coupled with limited A Grade offerings in the market, strong demand in the precommitment market is expected, as well as a tangible benefit to the secondary market in the short-term.