Parramatta CBD office market continues to perform

THE Parramatta CBD office market has outperformed most CBD and non-CBD markets across the country over the past three to four years, according to Ray White’s latest Between the Lines* commercial research.

The report stated that despite many large completions, withdrawals have aided in keeping occupancy levels tight with vacancies continuing at record lows, most recently achieving three per cent.

Ray White Head of Research Vanessa Rader said Parramatta CBD was growing in favour due to its relative affordability to Sydney, and that quality construction and CBD infrastructure improvements had led to attracting new occupiers and investors.

“After a robust few years for Parramatta CBD, the six months to January 2019 has allowed the market to take a breath, sit back and watch the construction of both the highly anticipated Parramatta Square and infrastructure projects,” Ms Rader said.

“With no major supply completions being added to stock levels during this period, we’ve seen some subdued take-up in space this period also, recorded at just 923sq m. Despite this little change, we did see vacancy further contract to just three per cent or 21,877sq m.

“This is the calm before the storm, as Stage four is expected to be completed in late 2019, adding 80,000sq m to the market with a high level of commitment.

“Stage three, the 46,000sq m office building home for NAB, is expected to be completed in late 2020 along with GPT’s 32 Smith Street, adding a further 26,400sq m, more than half of which is committed to QBE.

“The overall Parramatta CBD vacancy rate has moved back downwards to three per cent, the same rate achieved 12 months ago.

“This historic low is well under the outstanding longer term 10-year average which has reduced to just 6.9 per cent, highlighting the quality results that have now been achieved for many years.”

Ray White Commercial NSW – Western Sydney Associate Director and Licensee in Charge Joseph Assaf said rental growth had moderated after robust growth results achieved in prior years, despite the continued low vacancy environment.

“Over the past five years, the high demand for office accommodation coupled with the addition of new quality stock, has ensured ceilings have been broken regarding rental rates,” Mr Assaf said.

“Currently, prime gross face rents average $630/sqm which represents limited growth of just 2.44 per cent over the last 12 months, albeit this remains up 5.12 per cent p.a. over the last five years.

“Affordability continues to be key for this market when compared to Sydney CBD market, which now averages more than $1,000/sqm (net) for prime space.”

Ms Rader said demand for investment remained high across the Parramatta office market.

“Market fundamentals continue to perform well, resulting in a flurry of smaller sales activity during late 2018, highlighting the acceptance of assets of varying quality by investors,” she said.

“33 Argyle Street changed hands in November 2018, the 5,248sq m office sold for for $40.8M on a partial leaseback to NSW Aboriginal Land Council, to a JV of two foreign buyers on a reported yield of 4.90 per cent.

“While in October 2018, the KPMG leased asset 91 Phillip Street, exchanged to international fund BlackRock, for $56.63M on a yield of 5.10 per cent.”

*Ray White Between the Lines commercial research – Parramatta CBD office market overview – February 2019.

**Pictures courtesy of Parramatta City Council.