Sydney CBD strata market capital values up nearly 30 percent: Ray White
Capital values in Sydney's CBD office strata market have increased nearly 30 percent in the first half of 2016 with vacancies predicted to fall below five percent, according to new research released by Ray White Commercial.
Vanessa Rader, Ray White Commercial head of research, said despite a limited pool of sales transactions in the first six months of 2016 ($31.823 million), the overall capital value for strata premises has grown 29.33 percent on 2015 results.
“The average is now $8,067 per sqm across the Sydney CBD and this value growth has not been restricted to any one region,” Ms Rader said.
“The Core is up 24.67 percent to $8,223 per sqm and Midtown also had a 27.24 percent increase to $8,179 per sqm. Western Corridor only recorded around $3 million in sales which resulted in a smaller value increase of 3.13 percent to $6,597 per sqm while the Southern precinct, which is tightly held, recorded no transactions so far this year.
“Looking ahead, despite the supply pipeline of the CBD, early indications show that vacancy is likely to hit sub 5 per cent in the next round of vacancy statistics available in August which will put further pressure on rents,” she said.
“Similarly, despite this high growth in values, yields still remain attractive for investors and with occupation levels high, reducing risk, low interest rates continue to keep this investor activity from both domestic and international buyers high.
Anthony Harris from Ray White Commercial said the strong demand for Sydney CBD strata offices from investors and owner-occupiers was evident when two offices in a building at 33 York Street sold recently for $8.35 million – one of the first day it was on the market.
"There is now strong demand from tenants looking to buy as they are being forced to move due to the Sydney Metro Project, which will require compulsory acquisition of 19 commercial buildings," he said.
“I think we will see some occupiers having to get out of the CBD to locate their business due to the shortage of supply.
“On the leasing side we are seeing multiple tenants compete for space and in some cases tenant advocates offering to pay higher than the advertised rental in an effort to secure properties for their clients.”
