'Affordability a big issue': Value of Sydney's strata offices jumps 33 per cent in a year
The value of strata offices in the Sydney CBD has skyrocketed 33 per cent in the past year making them increasingly unaffordable for investors and small businesses, according to agents.
The reason for this spike in prices is largely because of a shortage of properties, brought about by buildings being demolished for the Sydney Metro line, while others were converted to residential use, a new report says.
While there were more than 83,000 square metres of refurbished office space completed in the first half of this year, the withdrawal of 10 properties totalling nearly 76,000 square metres cancelled out a bulk of the added stock. This left only 7,713 square metres of net supply, Ray White Commercial’s Sydney CBD Office Market Update shows.
A 13-square-metre office at 368 Sussex, Sydney, sold at a rate of $10,615 a square metre.
“High withdrawals have combated high supply with net supply remaining close to nil for most periods over this five year time frame,” the report said.
“The total stock level for the Sydney CBD is 5,086,316 square metres and despite the many completions since January 2012, there has only been a real change of 3.1 per cent in the stock level.”
Ray White Commercial director Christian Minards said owner-occupiers were flocking to secure a strata office, which had “seen an unprecedented lift in value”.
“Affordability is a big issue for many tenants in the CBD faced with huge rental hikes and limited incentive, many turning to co-working spaces or the quest to purchase strata stock, rendering this also unaffordable to many,” he said.
The report found that strata offices averaged at $10,127 a square metre in the CBD, up 33 per cent in the past 12 months.
While offices in the ”core CBD” outperformed other CBD areas, soaring 45.7 per cent to $11,711 a square metre.
The average price paid for a strata property in 2016 and 2017 was more than $1 million, compared with $844,000 in 2015.
CBD strata office sales in the eight months to September 2017 totalled $38.9 million, but ”these sales levels are unlikely to reach the $154 million recorded last year”, Ray White Commercial head of research Vanessa Rader said.
Investment yields have crept down to a new low in the past five years, with prime yields averaging at 4.85 per cent and secondary assets at 6.5 per cent.
