Developers queue up Sydney CBD projects
Sydney’s insatiable appetite for new CBD office buildings will lead a nationwide surge in new office supply in 2016.
More than 610,000sqm of new office stock is expected to be completed across Australia this year, up 9% on the 560,500sqm that came online in 2015, according to Knight Frank data.
Sydney will account for more than half of the new CBD offices over the next 12 months, with 318,000sqm of space to be added to the 183,000sqm the city welcomed last year.
Brisbane and Melbourne will also see a handful of new projects completed, though Knight Frank head of research and consulting Matt Whitby warns Melbourne is “nearing the end of a long supply cycle”.
Feasibility for construction of new space has been supported by steady declines in prime yields
The Sydney-centric new office boom is due in large part to the 179,000sqm of space soon to be completed at Barangaroo’s towers 3 and 1, which are expected to open in the first and fourth quarters of the year, respectively.
Whitby says shrinking yields have paved the way for Sydney’s current construction boom.
“Feasibility for construction of new space has been supported by steady declines in prime yields, particularly for fund through developments with strong pre-commitment.” he says.
The combined 108,000sqm of new space at 2 and 4 Collins Square will lead Melbourne’s CBD office additions, with both expected to be finished in the second half of the year.
Brisbane’s 55,000sqm development at 480 Queen St headlines the new offerings in the northern state. BHP, PricewaterhouseCoopers and Freehills will all call the complex home when construction wraps up in the first quarter of the year.
Although Whitby acknowledges Australia’s smaller CBD markets will miss out on much of the new stock, he says that in the currently office rental climate there simply isn’t a need for new developments.
According to Knight Frank’s data, Perth has only 2500sqm of Primewest-owned space at 251-267 St Georges Terrace scheduled to come online in 2016, down from 134,000sqm in 2015.
The pipeline for supply additions in 2017 and 2018 is currently very benign nationally
Adelaide is also set for a quiet year, with two projects totalling just 10,800sqm the only new buildings in the city’s 2016 pipeline.
“Perth, Adelaide and Canberra will all have benign supply over the next few years, which will assist in cushioning generally weak demand conditions,” Whitby says.
“The pipeline for supply additions in 2017 and 2018 is currently very benign nationally,” Whitby says.
The slew of completed offices will be partially offset by the expected 188,000sqm of office stock on Australia’s east coast that is expected to be withdrawn permanently this year, with residential and hotel conversions accounting for 80% of those office losses.