Newcastle CBD has one of the lowest office vacancies in Australia: Ray White

Newcastle CBD has one of the lowest office vacancies in Australia: Ray White
Newcastle CBD has one of the lowest office vacancies in Australia: Ray White

Now boasting one of the lowest vacancies in the country, the Newcastle CBD was set to continue an upward trajectory of employment growth to keep absorption positive and vacancies down, according to Ray White’s latest Between the Lines report.

“The investment into the Newcastle CBD by local government is starting to bear fruit,” said Ray White Commercial Newcastle Director Lee Follington.
 
“The initiatives to activate this market and make Newcastle a vibrant CBD has come to fruition, with new development and revitalisation of older stock out of the market, which has resulted in the vacancy declining.
 
“The upshot for investors in the market is the first signs of significant rental growth for prime assets, with the secondary market still lagging.
 
“But, yields have slightly risen given the increased difficulty in financing, reducing the pool of buyers of smaller commercial holdings.”

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Newcastle CBD has one of the lowest office vacancies in Australia: Ray White
 
Mr Follington said demand for Newcastle CBD office stock continued, recording its third consecutive year of positive net absorption
 
“Take up during the 2018 calendar year has totaled 2,065sq m, resulting in the continuation of vacancy decline,” he said.
 
“This period, downward vacancy was further assisted by the reduction in stock levels with net supply of just -2,818sq m, due to the withdrawal of several smaller properties for residential conversion.
 
“This continual reduction in stock levels has seen the Newcastle CBD office market record just 251,138sq m of stock, its lowest level since 2014.”

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Newcastle CBD has one of the lowest office vacancies in Australia: Ray White
 
Mr Follington said the demand for prime stock had been high this last year, resulting in large contractions in vacancies, this had a positive effect on the rental market which had shown a sizeable increase after a long-term period of stability.
 
“Net face rents currently average $355/sq m which represents a 5.97 per cent increase over the last 12 months, the limited supply of A grade stock has aided in this increase, with some smaller tenancies achieving rents in the $400/sq m to $450/sq m range,” he said.
 
“Currently, the average net face rent has recorded $250/sq m, which is up 2.04 per cent over the last year. That’s well ahead of the growth achieved in the prior five years.”
 
Ray White Head of Research Vanessa Rader said the Newcastle market was currently enjoying long-term lows with direct vacancy recorded at just seven per cent, well below most Australian CBD and suburban markets.

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Newcastle CBD has one of the lowest office vacancies in Australia: Ray White
 
“While this reduction in vacancy over the last few years was heavily due to stock contractions, the ongoing positive take up highlights the improvement in the local economy,” Ms Rader said.
 
“Demand is high for A grade stock with vacancy in this category falling from 6.4 per cent last year to just 2.8 per cent, sub-lease vacancy is also at a record low of just 0.1 per cent, this further emphasising the requirement for quality stock in the market.
 
“B grade absorption levels have also been elevated with vacancy now 8.3 per cent, down from 11.2 per cent 12 months ago, and this has been aided by the relocation of C and D grade tenants.
 
“While C and D grade stock have both enjoyed stock withdrawals, the loss of tenants has seen negative take-up levels and vacancy increasing in both quality grades, to 13.4 per cent and 12.2 per cent respectively.”

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Newcastle CBD has one of the lowest office vacancies in Australia: Ray White

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