CBD office demand spilling into metro markets

Demand from local developers and Chinese investors in CBD office markets is spilling over into the suburb market, according to new research from Colliers International.

Colliers International Managing Director of Capital Markets & Investment Sales John Marasco said a number of groups, have recently created listed metropolitan office funds but offshore and private buyers are creating demand for metropolitan office space.

"Institutional buyers traditionally prefer the established metropolitan markets of Parramatta, North Sydney and St Leonards in Sydney, Fortitude Valley and West End in Brisbane, and ST KILDA Road and Southbank in Melbourne,” he said.

“Given the strong demand for quality assets in our metropolitan markets, it is not surprising that there has been yield compression across most precincts. In Parramatta, yields for A grade stock now average 7.63%, down from 8% per cent in March 2015.

“In St Leonards, yields have compressed by 50bp over the six months to September 2015, to now average 8%, while in Melbourne, ST KILDA Road A Grade yields now average 7.63%, down from 7.88%  in March 2015, and City Fringe yields now average 7%."