Sydney Market Update 2020

MARKET STATUS

  • Vacancy rate is increasing due to the negative net absorption. Vacancy rates rose 3.3% over the 12 months, the highest since the completion of Barangaroo in 2016
  • CBD office vacancy rate is 7.5% Q2, 2020
  • Vacancy increased across all grades, Premium and A Grade are tighter than B Grade vacancy, partly with potential of ‘flight to quality’
  • Occupiers are handing back excess space leading to an increase in sub-lease space
  • Face rents remained flat, rising incentives led effective rents down 15% in the first half of 2020
  • OUTLOOK:
    • In Sydney CBD, a further increase in vacancy is due to the new stock which is due to hit the market over the coming 12- 18 months
    • Feedback from our team, is that most tenants are electing to hold, to see what could be offered in the market due to the current conditions. Tenants are not transacting at this stage, unless they have a specific requirement
    • Tenants willing to move are considering relocating into high quality fitted out premises, as they try to secure a ‘double’ incentive, rent free period
    • We see an increase in competition from numerous fitted out sublease space with long lease terms available. This may suggest that there may be an increase volume of fitted out sublease space while tenants look for cost savings
    • There may never be a better time to relocate
  • Vacancy rates in key areas *
    Chatswood 8.8% Up North Sydney 13.0% Up
    Crows Nest/St Leonards 9.0% Up Parramatta 4.5% Up
    Macquarie Park 6.8% Up Surry Hills 6.0% Up
    Newcastle 10.0% Up Sydney CBD 7.5% Up
    * Figures are based on TRS research Jul – Jan 20
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