National Australia Bank’s move to be anchor tenant at the $1.7 billion office and retail development at Wynyard Place and car-sharing service Uber’s move to GPT Group’s 580 George Street underpin the optimism of office landlords.
The two tenants, one a traditional bank, the other a new-look technology business, reflect the divergence of the city and its workers.
In the reporting season, office landlords of DEXUS Property, GPT Group, Investa Office and Stockland have all identified the Sydney cental business district as the growth engine of the country’s sector.
Investa Office Fund and DEXUS have forecast that the vacancy rate, particularly in the premium office space, will fall to between 3 and 4 per cent in the next three years.
This is boosted by growth in the financial/technology sector and the traditional banks, which are also taking out retail space.
Investa Office assistant fund manager Nicole Quagliata said the group was fielding many inquiries for its 10-20 Bond Street buildings “by the day”.
NAB will move from 255 George Street to nearby Wynyard Place, which is being developed by the Canadian heavyweight Brookfield Property Partners, and will be the anchor tenant.
This will leave 255 George and the adjoining 259 George Street – Suncorp Bank’s offices – up for lease. Suncorp Bank is moving to Barangaroo.
According to Jenine Cranston, senior director, advisory and transaction services at CBRE, Sydney’s first-half leasing inquiry volume has been very strong, comparing favourably to 2015 with an increase of just over 50 per cent in total. Notably, there has been an unprecedented level of inquiry with AMP, CBA and NAB all coming to the market this year.
“To put this into some context – in the three-year period between 2013 and 2015 there were only three inquiries over 30,000 square metre in size. We have had this many alone year to date and a total of 128,000 sq m of demand,” Ms Cranston said.
“At the other end of the size spectrum, there was also a near 80 per cent increase in the number of small tenants in the size range of 100-500 sq m. This size sector has always been the bellwether for the general health of CBD leasing and an informal indicator of small business confidence.”
Ms Cranston said the inquiry from tenants in assets acquired for the Sydney Metro had been concentrated in this size sector.
“Most of these tenants are seeking options close to their existing locations and few have moved to date, with a visible slowdown in the transaction process off the back of state cabinet’s budget questions on the project. We anticipate inquiry will gain momentum in the second half as all CBD tenants are now understood to have received notice to vacate.
“The only loser this year has been the 1001–3000 sq m size category where there was a near 9 per cent drop in the number of inquiries,” Ms Cranston said.
“We anticipate this will normalise again in the coming quarters and some of the drop-off can be attributed to tenants moving early to capture favourable market deals or tenants coming to the market early, provoked by the competitive tenant rep environment.
“Net effective rental growth has been visible in both the prime and secondary markets in the first half. CBRE Research puts this at 12.6 per cent and 12 per cent respectively – impressive for a market that has been languishing for some time.”
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