Robust growth in tightly-held Liverpool CBD

The Liverpool office market is tightly held with limited transactions occurring over the past few years, according to Ray White’s latest Between the Lines* commercial research.

“This is driven by a strong local investor and developer market, however, there have been limited prime assets traded in recent times,” said Ray White Commercial NSW – Western Sydney Managing Director Peter Vines.

“The robust growth seen in the Liverpool CBD has not gone unnoticed by a broader pool of buyers, and this has been instrumental in tightening the yield range from six per cent to seven per cent for prime assets, depending on the quality of the lease covenant.

“The region is home to a variety of stock, and in the last twenty years, larger public administration movements have seen the addition of more modern accommodation options. We’re also likely to see increased demand for assets coming from both Wollongong and WSU universities.

“As occupancy costs across more traditional office markets like Sydney CBD, Parramatta and North Shore have increased due to reducing vacancies, many small to medium businesses have considered suburban options, and that’s grown demand levels.

“Liverpool CBD also offers quality retail and transport options, making it an accessible employment location to cater for the growing Western Sydney population.

“This has also had a positive effect on the rental environment, growing occupation costs, which has resulted in owners holding their assets.

“Encouragingly for the region has been the State Government’s commitment to Liverpool in its Cities Plan, identifying it as a future growth node for both work and play, highlighting the likelihood of ongoing office development which will further rejuvenate the Liverpool CBD.”

Mr Vines said the Liverpool office market consisted of more than 277,000sq m, across 120 buildings.

“Of these, 57 properties are identified as low-grade quasi office/retail premises less than 1,000sq m, those more traditional offerings over 1,000sq m represent 243,000sq m,” he said.

“A-grade stock represents 28.65 per cent of this total market across five larger, modern facilities within the core CBD location.

“These assets are highly occupied by public sector tenants and offer larger, modern floor plates and offer higher sustainability ratings.”

Ray White Head of Research Vanessa Rader said the total occupancy level of the Liverpool CBD office market was high compared to other non-traditional suburban markets.

“Currently at 7.89 per cent, this market has enjoyed high occupancy due to significant local demand and growing interest in Liverpool as a CBD location,” Ms Rader said.

“Offering a mix of accommodation options, this market has been a quality alternative to the Parramatta CBD, which has in more recent years seen a swift decline in vacancies to its current low of just 2.7 per cent (July 2019, PCA).

“Because of this, and prolonged limited vacancy also in the Sydney CBD (currently 3.7 per cent), high escalation in rents has seen many occupiers seek more affordable accommodation options.”

Ms Rader said when the rental levels of office product across Western Sydney were considered, the strong values achieved in Parramatta CBD were highlighted, and that showed the issue of affordability for many small and local businesses.

“As the Sydney CBD rents exceed $1,200psqm gross on an average basis, many larger occupiers have sought the affordable, yet quality, modern offerings in the Parramatta CBD, resulting in strong increases over the past five years,” she said.

“As vacancy continues to compress in these markets, local occupiers have considered other suburban locations to keep accommodation costs down, but this has resulted in increases to rents also over the past two years.”

*Ray White Between the Lines – Liverpool CBD Office Market Overview – October 2019.

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