This article is from the Australian Property Journal archive
DEMAND for commercial developments is taking the place of the slowing residential pipeline in Parramatta, Sydney’s second CBD, as business turn their attention to western Sydney, according to Deloitte.
The firm’s new Parramatta Crane Survey shows there is 92,000 sqm of office floor space currently under construction, as the pipeline of DA approved apartments eases to 1,100, some 63% less than what is currently under construction.
The A-grade office market is at zero vacancy and total vacancy is 4.3%, below the Sydney CBD’s 5.9%.
Almost 860 new hotel rooms will have been built across four projects by 2020.
The report said developers are repurposing residential sites to meet the increasing demand for commercial developments, at a time of historically high infrastructure investment.
In September, Lang Walker’s Walker Corporation gained Council approval to amend its 600-apartment tower within the $2.4 billion Parramatta Square urban renewal project to a 71,000 sqm A-grade office tower.
Deloitte Western Sydney’s real estate leader, David Hagger said the shift would continue to attract higher-paid jobs to Parramatta.
“The Parramatta Square development alone could house over 20,000 workers, with around 10,000 more expected across the rest of the city. Many of these will be public servants, with the NSW Government being the anchor tenant after making the largest pre-lease commitment we have ever seen,” Hagger said.
The NSW Department of Planning and Environment, the NSW Office of Environment and Heritage, the Environment Protection Authority and NSW Department of Finance, Services and Innovation have all committed to leasing 3 and 4 Parramatta Square.
“Importantly, we are also seeing an influx of private sector companies, including the high profile move by NAB to make Parramatta its second home, with a number of other businesses now circling for space in the remaining repurposed commercial building on Parramatta Square.”
PWC, Western Sydney University and Sydney Water in 2 Parramatta Square Tower are also among the Parramatta Square tenants.
Last month, CorVal offloaded its 75 George Street complex to Mirvac for $86.3 million, having acquired the property five years ago for just $32.55 million. At the time it was a B-grade office building, but was the dual-building six-level complex was sold as an A-grade asset and fully leased with St George Bank as the anchor tenant.
Mirvac made the purchase with a view to putting a landmark commercial office tower on the site, which is considered “significantly underdeveloped”.
The survey showed there are currently 2,707 apartments under construction in the Parramatta CBD that are due for completion between 2018 and 2019.
There are a further 4,865 apartments proposed across 12 projects, creating the potential for a flood of the market. However, Hagger said the market is entering a cooling phase.
“There are only 1,110 apartments with DA approval in the pipeline, providing a short-term supply of approximately two-to-three years, indicating lower risk of oversupply.
“Developers are adjusting to changing market conditions – including limits on lending by banks, increases in stamp duty and land taxes and restrictions by Chinese regulators on outbound investments in real estate to name a few – and also note a clear shift towards commercial development.
While the pool of proposed apartments does represent a significant potential supply, these are not yet committed,” Hagger said.
“Given the current investment into commercial office space and transport infrastructure, we see potential for this supply to be unlocked after 2020.
“It is expected the region will benefit from the Badgery’s Creek airport and the Metro Sydney West projects over the next decade, with the Parramatta Light Rail to provide a connection between the upgraded Riverside Theatre, a repositioned Museum of Applied Arts and Sciences, and a new 30,000-seat stadium, with the Westmead Health and Education precinct and Sydney Olympic Park,” he concluded.
Australian Property Journal
