This article is from the Australian Property Journal archive
WOLLONGONG’S transition from heavy industrial roots to the economic and cultural heart of the Illawarra is attracting the attention of investors and businesses.
Some $1.4 billion in private investment in the city over recent years, a supportive demographic profile, a large, highly educated workforce, and population growth has underpinned the change, according to Knight Frank.
The number of businesses across all industries in Wollongong has risen 7.5% in the past two years. That may also have something to do with the regional centre being a competitive location to set up business – according to Knight Frank, it is 33% more cost effective than the Sydney, Melbourne or Parramatta CBDs.
Knight Frank head of Illawarra Ben Mostyn said office market conditions are continuing to improve, owing to the rise of the shared services sector.
“Tenants are seeing Wollongong as an attractive place to do business,”
A lack of large, contiguous A-grade leasing options in the market, combined with the demand, is causing rents to rise. A select basket of buildings achieve rents in excess of $520 per sqm gross, but prime gross face rents more broadly in Wollongong average between $425 and $500 per sqm.
Knight Frank head of leasing James Mulcair said while there had been no new supply in 2019, 2020 looks as if it will bring the largest addition of new supply to the Wollongong office market in a single year on record, with 17,000 sqm expected.
Knight Frank has brokered leasing commitments for the three biggest office developments set to come online in Wollongong. That included the recent with a commitment of 5,000 sqm from private company Mercer at the recently completed 12,500 sqm Langs Corner. It has also brokered a 6,700 sqm pre-commitment for the IMB Bank headquarters on Burelli St, as well as deals for more than 5,000 sqm of space in Gateway On Keira, which is now 80% committed and currently being handed over to tenants.
Investment on the up
National and international property investors are increasingly attracted to Wollongong’s office sector due to its relative value, according to Knight Frank, as well as the yield disparity between the city and Sydney’s metro markets.
Average yields are now estimated to range between 5.50% to 6.50% for upper A-grade assets.
Wollongong’s commercial real estate investment market has seen its price record broken three times in three years with the recent sale of 45-53 Kembla St for $58.4 million to Castlerock, also negotiated by Knight Frank.
Avari Capital Partners paid $50.38 million to the fund manager for 90 Crown St at the end of 2018. That came just one year after the previous record of $46.1 million, when Folkestone sold the six-level A-grade Corporate Square building at 43 Burelli St to an offshore private investor from Vietnam.
