The strength of the office market in Sydney’s central business district (CBD) has spilled over into the North Shore, particularly North Sydney.
The area to the north of Sydney has benefited recently from more occupiers moving their offices to the region, having been driven there by a lack of space in the CBD.
Savills Australia’s North Shore Briefing Notes, which has recently been released, shows that vacancy rates have been driven down, while rents have inflated as a result of the increase in demand. A Grade and B Grade net effective rents have risen by 18% and 25% respectively over 2017 in North Sydney.
Shrabastee Mallik, senior analyst of capital strategy in Savills Australia, said: “A lack of assets available for sale and affordability compared to the CBD has also seen an increase in interest in office assets in Sydney’s North Shore office markets, driving capital values to record highs.”
She added: “Investor interest in North Sydney office assets was further evident with several assets transacting at yields one would expect in the neighbouring CBD. For example, 1 Pacific Highway, North Sydney was sold for AUS$114.5m (around £64.4m) to a confidential buyer of Asian origin at an equated yield of 4.8% in October 2017, whilst 75 Miller Street, North Sydney was sold in December for $52m (£29.2m) to an investor from Hong Kong at a reported yield of 5%.”
With Sydney’s population expected to increase by more than two million people over the next 20 years, according to Mallik, residential conversions remain a prominent feature of the market, with developers continuing to purchase secondary grade stock for alternative use, redevelopment purposes.