The three factors behind Sydney's office market recovery
BIS Shrapnel notes that there will be little change over 2014 for Sydney’s CBD office vacancy, having anticipated that the recovery in net absorption of office space will be slow.
The modest recovery will be underpinned by three factors:
- Stronger business confidence
- Robust share market performance
- Economic growth picking up at state/national level
These reasons may make it more likely that companies will lease more office space, but even so it is unlikely to affect the vacancy rate, according to BIS Shrapnel’s Sydney Commercial Property Prospects 2014 to 2024.
By the end of this year, we’re expecting vacancies to have fallen by 0.3%.
Lee Walker, senior project manager and report author, said that the pick up in net absorption would provide a welcome relief for office landlords.
“[Some] market participants expect office stock withdrawals for residential conversion will see the CBD market tighten rapidly as developers look to take advantage of a strengthening residential market. However, the importance of withdrawals for residential conversion in the near term should not be over-stated,” said Walker.
Not all planned conversions will occur immediately, with existing tenant leases slowing down the process.
This has BIS Shrapnel expecting that over the next three years, 110,000 square metres of office space will be permanently withdrawn from the CBD. Just 20,000 of this is expected over 2014.
“Unfortunately, anyone hoping for a quick turn around in the Sydney CBD office market is likely to be disappointed” concluded Walker.
