Sydney strata office values soar 30% in six months

Sydney’s office leasing market will remain hot for some time

Strata office values in the supply-starved Sydney CBD market have skyrocketed by almost 30% in the first half of the year.

Data from Ray White Commercial shows that with sales in the tight-held market lagging well behind 2015, prices have soared to $8067 per square metre, up 29.33% on the $6240 per square metre recorded across the more than $120 million worth of strata office deals in 2015.

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“The Core is up 24.67% to $8,223 per square metre and Midtown also had a 27.24% increase to $8,179 per square metre,” Ray White Commercial head of research Vanessa Rader says.

“(The) Western Corridor only recorded around $3 million in sales, which resulted in a smaller value increase of 3.13% to $6,597 per square metre, while the Southern precinct, which is tightly held, recorded no transactions so far this year.”

I think we will see some occupiers having to get out of the CBD to locate their business due to the shortage of supply

Meanwhile, Sydney strata office tenants are expected to face similar price hikes, with vacancy predicted to dip below 5% and face rents to rise as a result.

Rader says that with rents rising and reduced rental incentives, many small businesses are electing to buy their own premises.

Sydney 's CBD office spaces continue to be highly sought after

Sydney ‘s strata office market is becoming even more tightly-held.

“Looking ahead, despite the supply pipeline of the CBD, early indications show that vacancy is likely to hit sub-5% in the next round of vacancy statistics available in August, which will put further pressure on rents,” she says.

“Similarly, despite this high growth in values, yields still remain attractive for investors and with occupation levels high, reducing risk, low interest rates continue to keep this investor activity from both domestic and international buyers high.”

Among recent Sydney strata sales, two offices at 33 York St sold for $8.35 million shortly after being listed on the market.

Ray White Commercial’s Anthony Harris says many tenants are now looking to buy, after being displaced due to the compulsory acquisition of 19 CBD buildings to make way for the Sydney Metro project.

“I think we will see some occupiers having to get out of the CBD to locate their business due to the shortage of supply,” Harris says.

“On the leasing side we are seeing multiple tenants compete for space and, in some cases, tenant advocates offering to pay higher than the advertised rental in an effort to secure properties for their clients.”