Sydney premium strata office prices surge as owner-occupiers buy up12-14 O’Connell Street, Sydney, where a 93sq m strata office recently sold for more than $2 million.

Sydney premium strata office prices surge as owner-occupiers buy up

Sydney CBD strata office prices are hitting record highs due to lack of supply and low interest rates that make it cheaper for businesses to buy than rent.

Agents say the urge to buy is particularly strong for small to medium-sized legal, accounting, financial and medical businesses with a CBD client base.

Shrinking supply is also a significant factor in a market where some offices have sold within 24 hours of being listed.

A major recent catalyst for the shortage is the NSW government’s acquisition of 11 buildings to make way for Sydney Metro West station entrances around Hunter Street.

This move alone has taken more than 180 strata offices in three buildings – 37 Bligh Street, 300 George Street and 5 Hunter Street – out of play in the key area around Wynyard Station, according to Noonan Property.

Willem Watson from JLL said this was forcing up demand for existing offices with a recent 93 square metre office on level 7 of 12-14 O’Connell Street selling to a financial services business for just over $2 million at a cost of $21,506sq m.

An 88sq m office on a lower level and with a lesser fitout in the same building sold for $19,000sq m a month earlier.

“There’s a genuine lack of premium stock. Assets with harbour views, elevated, lots of natural light, anywhere between 75 up to 200 square metres plus are probably the most contested at the moment,” Mr Watson said.

He said businesses with 20 to 30 staff are most actively seeking owned strata space and that for high-quality offices there can be up to 200 inquiries from serious buyers.

“The most recent O’Connell Street office launched and sold on the same day, off the back of the property we sold downstairs on level 4,” he said.

That transaction was JLL’s sixth over a four-week period at an average price of $19,841sq m.

Mr Watson said many businesses he is dealing with were being advised by their accountants to buy rather than rent.

“It’s more affordable and you get more tax breaks to buy your own property,” he said.

“Let’s say it’s purchased by a SMSF [self-managed super fund], it’s more beneficial to buy and lease back.”

For investors, it is a different story, particularly in the sub-prime strata sector, where rents and tenancies are in a state of flux due to COVID-19, Mr Watson noted.

Strata sales and leasing specialist Tim Noonan agreed the premium market is buoyant and estimated that prices have risen by an annual average of 15 per cent to 20 per cent over the past three years.

“The market has been very strong off the back of limited supply,” Mr Noonan said.

In a sign of the times, Mr Noonan sold the 800sq m office on the top floor of 66 Hunter Street with parking for $14.75 million in August, which he believes is the highest price paid for a whole floor strata office in Sydney.

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