This article is from the Australian Property Journal archive
Sydney’s CBD has posted the strongest net absorption in five years, but demand for space is not consistent across the entire market, new figures from the Property Council show.
In addition to the Property Council’s Office Market Report, released last week, new figures yesterday show Sydney CBD’s western corridor is gaining in importance.
Of the six locales surveyed, all but one posted vacancy decreases in the six months to January 2006.
Property Council NSW executive director Ken Morrison said the CBD’s Western Corridor asserted its rising dominance in the six months to January.
“Vacancy in the Western Corridor of Sydney’s CBD dropped by 2.2% to 9.6%. This continues the trend of large, consecutive reductions in vacancy seen in this locale for the past 18 months.
“Importantly, the Western Corridor achieved this result despite the addition of nearly 36,000 sqm of new space, the largest in a single period for two years.
“Significantly, net absorption was more than 45,000 sqm, the strongest in this locale since January 1994,” Morrison said.
According to the report, in the Western Corridor, demand is outstripping supply.
The Rocks had the lowest vacancy at 5.8%, the result of a brief demand spike, while Walsh bay had the highest vacancy at 13.7%.
“The driving factor in Walsh Bay is supply, which was nil over the period, allowing this market to ‘catch up’ in terms of net absorption.
“However, it should be noted that vacancy in Walsh Bay has been steadily trending downwards since the Property Council began tracking it in January last year,” he concluded.
By Adam Parsons
Analysis by locale – six months to January 2006
City Core
- Vacancy for the City Core dropped by 0.6%age points to 8.6%
- 58,681 sqm of additional supply entered the City Core market in the period. It is the single largest addition of supply since January 2001
- Net absorption was 52,557 sqm, the strongest net absorption figure since July 2000
Western Corridor
- Vacancy for the Western Corridor dropped by 2.2%age points to 9.6% in the six months to January 2006. This market has seen large, consecutive reductions in vacancy for the past 18 months
- Total additional supply to this market was 35,940 sqm, the largest addition for two years
- Net absorption was 45,018 sqm, the strongest since January 1994. It is significant that net absorption outstripped total supply
Mid-town
- Vacancy for Mid-town increased by 1.8%age points to 12.4%
- Net absorption for the period was just 6436 sqm, and a total of 30,329 sqm of space was added over the period
- There was a spike in demand for this market last year, but demand has been weakening in this market since 2002. Stock is being continually added
Southern CBD
- Vacancy for the Southern CBD decreased by 1.1%age points to 7.4% over the period
- A total of 9376 sqm was added over the period. While a small amount of stock, it is still the single largest addition to this market since mid-2002
- Net absorption was 12,181 sqm, the strongest result since January 2001
- This market is dominated by government tenants. Low supply is keeping vacancy in this market low. The market is steadily chewing up existing supply
Walsh Bay
- Vacancy in this market dropped by 2.2%age points to 13.7% over the six months to January 2006. While it matched the Western Corridor in vacancy reduction, its vacancy is still relatively high
- This market was characterised by a lack of additional supply over the period
- Most of the vacancy is in the sub-lease market, which is at 12.8%. Direct vacancy in this market is only 0.9%
- Vacancy has been trending down in this market since the Property Council began tracking it in January 2005
The Rocks
- Vacancy in this market dropped by a massive 10.2%age points to just 5.8%
- There has been a demand spike in The Rocks. Demand has been trending downwards for the past 18 months, with negative net absorption since July 2004. However, net absorption of 4350 sqm was posted in the six months to January 2006
- Because this market is so small, it is susceptible to large tenant movements
Key market indicators, Sydney CBD (by locale)
|
Locale
|
Vacancy, Jan 06 (%)
|
Vacancy, Jul 05 (%)
|
Net absorption, 6 months to Jan 06 ( sqm)
|
Net absorption, 12 months to Jan 06 ( sqm)
|
|
City Core
|
8.6
|
9.2
|
52,557
|
49,268
|
|
Western Corridor
|
9.6
|
11.8
|
45,018
|
65,751
|
|
Mid-town
|
12.4
|
10.6
|
6436
|
32,717
|
|
Southern CBD
|
7.4
|
8.5
|
12,181
|
15,570
|
|
Walsh Bay
|
13.7
|
15.9
|
1089
|
7344
|
|
The Rocks
|
5.8
|
16.0
|
4350
|
-7358
|
|
Total
|
9.7
|
10.2
|
121,631
|
163,292
|
