A lack of office supply over the next three years will continue to drive demand for Sydney CBD properties, particularly in the Western precinct.
According to Laing + Simmons Commercial Tim Noonan the strong sentiment amongst investors, institutions and analysts is being driven by a view that despite a recent poor performing leasing market, the general fundamentals governing demand and supply of office stock and longer term growth are very strong.
“The shortage of new construction until 2005 will give the market plenty of time to recover from the effects of higher vacancies experienced after the corporate collapses and economic uncertainty,” Noonan says.
“Once the external weakness’ pass, the Australian economy will accelerate quickly with renewed capital expenditure driving a strong recovery in business services. Accordingly, any positive net absorption will translate directly into reduced vacancies, with the CBD vacancy rate expected to fall to around 5.5% by the end of 2004.”
Mr. Noonan says the Western precinct of the CBD is a ‘growth area’ for investors and businesses, largely due to the high number of small businesses opting to relocate from the financial core to smaller buildings.
“These buildings generally offer attractive leasing conditions and smaller floor plates to enable whole floor tenancies,” he says.
Noonan concluded that Federation style buildings are continually sought by owner occupiers and investors with yields of 6 – 6.5% being achieve.
