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Market Summary of Sydney Strata Office Shortage

Date Added: December 02, 2008 01:42:27 AM
Author: rianne de leon
Category: Business & Economy: Finance and Investment
The shortage of strata office in the Sydney CBD is expected to put increased pressure on strata prices according to the new forecasts from CB Richard Ellis. CBRE warned that the market was likely to be constrained by a stock shortage, with no significant new strata projects on the drawing board for the CBD. Typically there is demand for 25,000 – 30,000 m2 of strata space in the CBD on an annual basis, and at the moment they can only count 4,000 m2 of supply and only one small strata project being undertaken. CBRE noted that there is a significant gap between the m2 rates for freehold buildings ($9,000/m2) versus strata office ($6,000/m2); as a result they suggested that strata offices are considerably undervalued. Savvy investors were seeking to acquire whole strata floors which they could subdivide into smaller lots and on-sell. Savills recently noted that despite the current uncertainty in the marketplace, Sydney’s office rents have continued to grow and are expected to keep growing. Savills NSW director of office leasing, Robert Dickins stated that average A grade rent in the CBD has increased by 21.7% over the past 12 months. The net face rents in the Sydney CBD typically range between $550/m2 to $850/m2 for A grade buildings, and between $400/m2 and $550/m2 net for Secondary Grade buildings. Most of the strata office space is coming on line from the new development cycle is likely to be largely pre-committed judging by current activity levels. The Sydney CBD vacancy was around 6.5%, which is below its 8.1% average this decade. The Australian Property Market Monitor 2008 by LJH Commercial and BIS Shrapnel indicates a bullish short term outlook for the commercial property market and an even stronger rebound next year. LJH Commercial forecast that although some commercial markets across Australia will move into a new downturn phase in the medium term, Sydney’s commercial property market is likely to shift upwards and perform strongly. Prospergroup is a leading group of Sydney Buyers Agents.
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