DESPITE the uncertainties in the economy and surrounding the future of office space, the Parramatta CBD office market is well-poised to recover from the COVID-19 pandemic in the coming years, according to Ray White Commercial’s latest Between the Lines* research.
“Parramatta CBD continues to be one of the better performing office markets across Australia, with the impacts of COVID-19 somewhat limited with few major movements due to the pandemic,” said Ray White Commercial Head of Research Vanessa Rader.
“Office users, however, are considering their accommodation options with many businesses rationalising space or looking for cost savings, while taking advantage of the incentives currently on offer.
“Backfill is a growing issue across this market, with completions over the last year and into 2021 resulting in tenant relocation and consolidation resulting in available backfill spaces including various government departments, Commonwealth Bank, and Telstra.
“This trend will hamper vacancy and keep absorption levels subdued in the first half of 2021, forecast at -15,584sq m.
“In the six months to January 2022 take-up will grow in line with the completion of committed supply such as 6PSQ to 55,358sq m however will still raise vacancies to 13.44 per cent.
“With limited white-collar employment growth anticipated across the whole economy as we navigate a post-COVID-19 world, vacancies are anticipated to continue to grow peaking at 16.45 per cent in January 2023, before rapidly moving down as supply and demand levels normalise.”
“The Parramatta CBD enjoyed strong levels of rental growth over the past five years due to the low vacancy environment,” said Ray White Commercial Western Sydney Leasing Director Alan James.
“Strong demand also assisted the secondary market as the gap between prime and secondary assets narrowed due to these limited stock options.
“The current economic environment has put pressure on employment levels while new supply projects continue growing the vacancy position.
“Coupling this with current occupiers reconsidering their accommodation options, sizes and the increases anticipated to continue in total and sublease vacancies, the rental market is expected to see some significant shifts.”
“The surge in investor interest was high prior to the onset of COVID-19 with volumes in 2019 exceeding $900million,” said Ray White Commercial Western Sydney Director Joseph Assaf.
“Quality new offerings as well as older style stock is selling to a vast range of institutional and Australia-based Asians buyers in the marketplace seeking their next opportunity in this rapidly growing market.
“The low vacancy environment is a major drawcard for many buyers as rental growth sets new benchmarks in returns, however, the longer-term confidence in Parramatta is clear as it emerges as Sydney’s true second CBD.”