Vacancy rates in the Parramatta office market are currently sitting at 10.2 per cent, after steadily increasing over the past six months as the new developments reach completion and demand is reduced due to the changing market conditions brought on by the Covid pandemic.
Net absorption over the last six months has been -7,016sqm, with total office stock sitting at 836,026sqm, including 26,500sqm of new supply.
A grade has seen the largest increase in vacancy now sits at 11.4 per cent or 44,976sqm (from 0.4 per cent, 18 months ago) as a consequence of the development boom.
This quantum of A grade stock on the market has never been recorded before with a previous high of near 35,000sqm in 2006.
This current rate includes 2.2 per cent of sublease space or 8,700sqm well ahead of the average total A grade vacancy over the last five years which was just 2.500sqm.
Encouragingly we saw B vacancies decline over the last six months to 5.7 per cent due to positive take up by a number of smaller tenants upgrading from C and D grade properties.
C grade stock continues to see the highest vacancy, currently recorded at 15.9 per cent.
“Looking ahead, continued increases in vacancy notably in the prime grade stock due to new additions to the market will put pressure on effective rents,” Ray White Commercial head of research Vanessa Rader said.
“This may result in some tenancies reconsidering their accommodation options and opting for better quality (and perhaps smaller) opportunities which are more affordable, putting a further divide between occupancy in prime and secondary stock into the future.”
Ms Rader said the completion of new office spaces in the Parramatta CBD would create more challenges for the market.
“The completion of 3 and 4 in the Parramatta Square (PSQ) development by early 2020 has shown its impacts on the Parramatta office market,” she said.
“Despite heavy pre-commitment, further backfill and sublease has been felt this period.
“Now the completion of 32 Smith Street has added a further 26,500sqm to the total stock level, more than half of which was committed to QBE and Coleman Greg relocating from within this market, creating more backfill challenges.
In the next six months we expect to see 6 Hassall Street (28,000sqm), for the University of Western Sydney and UNSW, not fully occupied, together with the completion of
6 PSQ will tell a similar story with commitment levels not meeting supply, leaving a shortfall.”
Ray White Commercial Western Sydney director commercial leasing Alan James said the supply pipeline for the Parramatta office market will continue to be problematic over the short term, as the region’s population and employment growth had been sidetracked by the pandemic.
“New supply and sublease space have led to Parramatta’s largest increase in the vacancy rate with it forecast to reach levels not seen since the 90s,” Mr James said.
He said while tenant activity had started strong in 2021, it had seen a significant drop in recent months.
“Understandably tenant activity has dropped off during the latest lockdowns,” Mr James said.
“However, we expect activity to increase once the restrictions are eased where tenants will again be focusing their attention on quality assets, taking advantage of the higher incentive environment.”
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Head of research
Ray White Commercial
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Director- commercial leasing
Ray White Commercial Western Sydney
Ray White Group
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