North Sydney’s office market is off life support with a swathe of new leases, albeit in the new towers, at rents that rival CBD counterparts.
While vacancy in the lower-graded sites sits in the double digits, there is a surge in demand for tenancies in the premium skyscrapers being built or near completion.
In the latest Property Council of Australia’s Office Market Report for the six months to January, North Sydney’s vacancy tipped the scales at just under 20 per cent, with most of the empty offices located in older sites.
But that has not impacted rents, with rates for floors in new high-rise towers breaching $1200 per square metre. And as demand gains pace, so too will rent growth, agents in the area say.
Developers have identified North Sydney as the growth engine for the sector, both for traditional financial and insurance services and the less CBD-based traditional sectors of the media and IT industries.
One of the latest sites nearing completion is the 50-level commercial development at 88 Walker Street from developer Billbergia.
Colliers International is leasing what will be the tallest tower in North Sydney when it is completed around the third quarter of 2022.
It will be the first commercial office development to be delivered in North Sydney since 2020 and is expected to capitalise on pent-up market demand combined with post-COVID leasing trends, including flight to quality and a desire to reduce commuting times.
Designed by architects Fitzpatrick + Partners, 88 Walker Street will comprise 23 levels of commercial office space above a 21-storey, 252-suite 4-star hotel to be operated by Citadines.
Construction on the 5-star Green Star tower has passed Level 8, being built cantilevering over the airspace above the heritage-listed Firehouse Hotel, dramatically increasing the floor space from around 4000 square metres to more than 24,000 square metres.
John Kinsella AM, managing director of the Billbergia Group, said it’s a priority for Australian property groups to deliver well-serviced business and residential communities, and at 88 Walker Street, “it is demonstrated not only by the depth of the immediate corporate environment but also by the location, form and mix of the building”.
Asking rentals at 88 Walker Street have not been disclosed. Leases in both new office developments and existing assets are achieving net face rents from the high-$800 range to more than $1000 per square metre per annum.
Other recent signings have been in the Winton group’s 1 Denison Street: Luxotica, the owner of sunglass brands of Ray Ban and Oakley, for three floors; Red Hat software; and Datacom. Rents were not disclosed but said to be, for the high-rise floors, up to $1200 per square metre. They will join anchor tenants Nine Entertainment (the owner of this masthead), SAP and Microsoft, and an array of food retailers.
Colliers International’s agent for 88 Walker Street Michael Lochtenberg, director of leasing and development, expects a range of industry sectors to be attracted to 88 Walker Street, including local high-tech and media industries, business service consultants and returning Sydney CBD tenants – particularly in the marketing sphere.
“In the post-COVID environment, many corporates are migrating to North Sydney in a ‘flight to quality’, seeking flexible, collaborative workspaces. For many, lower rents compared to the Sydney CBD and easier accessibility for North Shore-based executives are also big drawcards,” Mr Lochtenberg said.
“North Sydney is no longer considered a secondary market to the Sydney CBD and is now home to large high-profile tenants with Nine Entertainment.”
Paul Lynch, JLL’s senior director – head of Northern Sydney, said a healthy improvement with inquiries in the final quarter of 2020 is coming to fruition in North Sydney.
“Larger corporates are taking advantage of favourable market conditions, focusing their space requirements on prime grade assets which provide best-in-class on-site amenity and service for their people. Expect to see a healthy level of positive take-up across North Sydney in the first half of 2021,” Mr Lynch said.
Mr Lochtenberg said that the opening of the new Metro in 2024 will provide even greater accessibility to the Sydney CBD, and North Sydney will soon be recognised as “Sydney North”.
“A hiatus in supply over the next 24 months will allow backfill vacancy to be absorbed before potential new supply emerges from 2023 and beyond,” he said.
Keep up with Commercial Real Estate news.
Keep up with Commercial Real Estate news.