Parramatta residential construction slows in shift back to offices: Deloitte

Parramatta residential construction slows in shift back to offices: Deloitte
Parramatta residential construction slows in shift back to offices: Deloitte

Developers are repurposing Parramatta residential sites to meet an increasing demand for high quality commercial developments, according to new analysis from Deloitte of the Parramatta development market.

Their inaugural Parramatta Crane Survey revealed an unprecedented level of construction in Parramatta, identifying 39 developments.

The report concluded that the "most exciting prospect is that the long term prosperity of Parramatta as a more ‘liveable’ city is being enabled through higher urban amenity." 

Across these developments, the survey discovered: 

92,000sqm of office floor space currently under construction

*  Zero vacancy rate for A-Grade office space with total vacancy rate at 4.3% compared to 5.9% in the Sydney CBD 

*  apartment construction is slowing with only 1,100 DA approved apartments in the pipeline - 63% less volume than currently under construction 

*  By 2020, 857 new hotel rooms will have been built across four projects.

Parramatta residential construction slows in shift back to offices: Deloitte

The survey author and Deloitte Western Sydney’s Real Estate Leader, David Hagger, noted that the shift of momentum towards commercial development will continue to attract higher paid jobs to Parramatta.

“The Parramatta Square development alone could house over 20,000 workers, with around 10,000 more expected across the rest of the city.

"Many of these will be public servants, with the NSW Government being the anchor tenant after making the largest pre-lease commitment we have ever seen.

"Importantly, we are also seeing an influx of private sector companies, including the high profile move by NAB to make Parramatta its second home, with a number of other businesses now circling for space in the remaining repurposed commercial building on Parramatta Square,” said Hagger.

Ongoing investment and rising job numbers should in turn continue to underpin growth in the residential market, he suggests.

The survey reveals that there are currently 2,707 apartments under construction in the Parramatta CBD, due for completion between 2018 and 2019.

With a further 4,865 apartments proposed across 12 projects, a potential ‘flood’ of the market has been predicted by some commentators, but according to Hagger, however, the survey indicates a different outcome.

“We see the market entering a cooling phase.

"There are only 1,110 apartments with DA approval in the pipeline, providing a short-term supply of approximately 2-3 years, indicating lower risk of oversupply."

He suggested developers are adjusting to changing market conditions - including limits on lending by banks, increases in stamp duty and land taxes and restrictions by Chinese regulators on outbound investments in real estate - and also note a clear shift towards commercial development.

"The pool of proposed apartments does represent a significant potential supply.

"However, these are not yet committed. 

The Deloitte Real Estate team undertook research on the number of developments underway in the Parramatta Central Business District and is accurate to the best of their knowledge as at 30 September 2017.

It has been recently revealed that Lang Walker has scrapped his high rise residential project instead building offices.

"From where I sit, I won't be comfortable tackling a tall residential tower in Parramatta ... maybe in two years' time," the AFR quoted Walker Corporation executive chairman Lang Walker saying.

"Banks are very reluctant to lend to this area ... it will cool for a couple of years and it will come back up. But it's not a doomsday scenario at the moment."

Walker attributes his decision to the huge supply in both Parramatta and Camelia, an industrial suburb near Parramatta, now a brownfields precinct for high density living.

This week Singapore-listed property developer CWG has sold The Peak, its 45 storey Parramatta residential project site at 14-20 Parkes Street for $40 million.

Tags: 
Parramatta Apartment Oversupply

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