Blog - TGC News
SYDNEY CBD LEASING MARKET UPDATE – OCTOBER 2017
As we head into the last quarter of 2017, demand for office space in the Sydney CBD remains strong, bringing with it a further decline in vacancy rates to 5.9 per cent – the lowest since 2008.
The low vacancy rates have been driven by a significant drop in office supply, primarily fuelled by the government’s acquisition of seven buildings in the CBD to make way for the new Metro rail development.
Additionally, the new development at 301 George Street, as well residential conversions at 275 George Street, 280 George Street and 1 Alfred Street, have seen tenants evicted and tens of thousands of square metres of office space sucked from the market. As a result, hundreds of tenants have been displaced, left to look for new offices.
Limited stock, coupled with competition amongst potential tenants, have meant that landlords have been able to increase rents and reduce incentives.
With demand often outweighing supply, and secondary gross effective rents in the CBD increasing by up to 25 per cent in the last 12 months alone, many tenants have been forced to look at other areas of Sydney. City Fringe suburbs from Pyrmont to Surry Hills and Redfern have proven popular, as have North Sydney which will continue to benefit from excess CBD demand.
Traditional blue-chip tenants have also found it difficult as they compete for quality space, with new industries and technology businesses keen to establish their offices in the CBD to attract staff.
In the current climate, it is not uncommon to see four or more companies competing for the same space, where there can be only one winner.
The tightening market also means that some tenants are choosing to extend or renew their leases in their existing premises, particularly in sub-1000 sqm premises.
We will see a new wave of commercial towers reach completion and deliver more supply, but not before 2019. Until then, the market will remain strong and competition for good space fierce. Our advice is to search the market and when you have found something suitable, act on it, so you don’t have the disappointment of missing out.
If you are looking for a new office space to call home, take a look at the full range of office spaces here or give us a call on 1300 458 800 to discuss your leasing requirements.