Experts point to empty offices for extra housing supply as new builds stall
Residential construction rates aren’t expected to pick up pace until 2024. Picture: NCA NewsWire / Damian Shaw
Commercial office approvals have hit a long-term high in Sydney, pushing new residential builds down the waiting list.
Recent figures from the Australian Bureau of Statistics indicated national commercial building approvals had grown by 39.8 per cent, while residential builds increased by 7.7 per cent.
Across NSW, commercial approvals increased by 8.7 per cent while declines were recorded in the Sydney metropolitan area.
Much of the commercial market growth in Sydney has come off the back of infrastructure projects in the civil, education, and healthcare sectors.
Ray White’s commercial head of research Vanessa Rader said that growth in residential builds could be likely to return in 2024.
“Our lack of ability to move projects into the construction phase is further hampering our housing shortage we have here in Sydney,” she said.
“It takes some time to build a high rise asset and the fact that there are not more being added to our skylines suggests the shortage situation we are in will remain an issue into the future.
“Given the mismatch between demand and supply for the residential market, pressure on development will likely continue which may see crane rates grow across the residential segment in the coming year.”
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The data comes as recent leasing deals across Sydney have highlighted demand for office space that can be transformed for educational use.
Since 2022, international colleges have been the most active tenant across Sydney – including a recent purchase of Level 2 95 – 97 Grafton St in Bondi Junction.
The Grafton St property was leased by the Britts College group earlier this year, with the intention to use the property as classrooms and offices.
The whole of NSW has seen an 8.77 per cent increase in new commercial development.
Other recent office to classroom transactions took place at Level 3, 4 Railway Parade in Burwood, and Level 4, 84-86 Mary St in Surry Hills.
Ray White Commercial agent John Skufris said that the increase in leasing transactions coincided with an increase in migration to the major cities.
“These premises were either already approved for educational use, or had the potential to be as other college operators were located at the same buildings.
“Most of the incoming tenants already had campuses in other states and cities and secured leased premises with existing fit outs, some furnishings and natural light on multiple sides.”
One expert has suggested converting unused office spaces into residential apartments to address shortages in housing.
Philip Oldfield is an associate professor from UNSW’s School of Built Environment and said office-to-residential conversions come with challenges.
Professor Oldfield argued many office buildings would need to be redesigned and styled to provide healthy accommodation.
“We’ve got what I call an environmental contradiction: that we need to contribute to far fewer emissions. So there’s this shift towards thinking about when we need to build, and how we can adaptively reuse existing assets. We need to be creative and converting these [under-utilised] office blocks into apartments is one possible way.”
“It’s all about balance. We’re obviously trying to make money and we’re trying to save carbon emissions. We’re trying to reuse assets in a sustainable way, but we cannot do that to the detriment of people’s health and wellbeing.”
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