North Sydney office rents bolstered by investments in the market: Colliers

North Sydney office rents bolstered by investments in the market: Colliers
North Sydney office rents bolstered by investments in the market: Colliers

Investment in new developments, amenity and infrastructure have bolstered rents in North Sydney despite vacancy increasing marginally, according to Colliers International’s latest Metro Office report.

B Grade net face rents increased an impressive 17.8 percent in the year to March 2017, the highest in Colliers Edge records (since 2005).

"A five per cent reduction in incentives, falling to 20 percent, further drove a significant uplift in net effective rents, increasing 29.6 percent over the last 12 months,” the report stated.

A Grade office property rents continue to remain stable Colliers says.

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North Sydney office rents bolstered by investments in the market: Colliers

“Meanwhile, A Grade net face rents remained stable, with the primary driver of an 11.3 percent increase in net effective rents being a 5 percentage point reduction in incentives over the last 12 months to 23 percent.

"Positive net effective rental growth is projected to continue as office supply remains constrained due to hotel and residential conversions, coupled with the Sydney Metro line office acquisitions.

"Approx. 10,000sqm has already been withdrawn with a further 3,000sqm this year to be replaced with the rail line, and a potential 22,000sqm withdrawn for hotel and residential projects by 2019,” the report advised.

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North Sydney office rents bolstered by investments in the market: Colliers

Colliers also says that furthermore, tenants from Milsons Point, McMahons Point and St Leonards have also been displaced due to a number of residential conversions.

“This has further benefitted the North Sydney office market, resulting in an uplift in tenant demand and competition for office space.

"In addition to infrastructure developments, the improvement in amenity is also expected to underpin North Sydney’s strong rental growth moving forward, as it offers a good value proposition to displaced tenants from the CBD due to a large number of withdrawals.

"The upgrade of Brett Whitely Place, a new dining precinct located in Greenwood Plaza at 101 Miller, as well as Woolworths opening in 100 Miller Street are expected to assist in solidifying North Sydney as an extension of the CBD,” the report commented.

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North Sydney office rents bolstered by investments in the market: Colliers

Total market vacancy increased marginally from seven per cent to 7.1 percent according to the PCA Colliers says.

“A and B Grade vacancy increased but were offset by a substantial reduction within premium stock, from 41.2 percent to 25.2 percent vacancy.

"Looking forward, total market vacancy is projected to fall over the next 12 months to 6.5 per cent due to the aforementioned conversion and infrastructure projects along Miller, Walker, Denison, Arthur and Mount Streets, assuming these displaced tenants will relocate within North Sydney,” the report stated.

The next two years will see the CBD office market tightening according to Colliers.

“Over the next two years, the Sydney CBD market will tighten further driving positive rental growth in that market, and as a result more tenants will consider North Sydney as a relatively affordable alternative.

"North Sydney experienced strong net absorption (27,068sqm) for the six months to January 2017 as tenants relocated from outside market boundaries.

"According to the PCA 19,000sqm of net tenant demand was attributed to tenants relocating from other markets to the recently completed 177 Pacific Highway.

"Jacobs relocated from St Leonards, Leighton Holdings consolidated from 11 buildings across Sydney and Vodafone consolidated from their existing North Sydney & Chatswood offices.

"Goodman Fielder also relocated and expanded their footprint within North Sydney from Macquarie Park to secure 3,700sqm in 40 Mount Street.

"In addition, Channel 9 has officially announced its move to North Sydney from Willoughby, occupying Winten Group’s 1 Denison (60,000sqm) scheduled for completion in early 2020, further proving the returned strength of North Sydney’s office market.

"As a general theme to suburban markets, what will be Channel 9’s old building in Willoughby was sold to Hong Kong-based property investors Euro Property with the intention of developing apartments,” the report commented.

A 68 sqm office at Suite 4, 172 Pacific Highway, North Sydney (above) has been listed for over $675,000.

Similarly a 140 sqm office at 12 Ridge Street, North Sydney (below) has been listed for $2.5 million.

North Sydney office rents bolstered by investments in the market: Colliers

A 125 sqm office at Suite 102, 161 Walker Street, North Sydney (below) was sold in April this year for $740,000.

North Sydney office rents bolstered by investments in the market: Colliers

Similarly a 309 sqm office at L1, 73 Walker Street, North Sydney (below) was sold in March this year for $1.75 million.

North Sydney office rents bolstered by investments in the market: Colliers

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Colliers International North Sydney

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