SYDNEY CBD strata office volumes for the first half of 2019 continued to be robust, with $101.77 million recorded in sales, according to Ray White’s latest Between the Lines research.
 
Ray White Commercial NSW Associate Director Samuel Hadgelias said that while overall fundamentals of the Sydney CBD office market remained strong, the overarching demand levels for purchasing strata stock were starting to show signs of wavering.

He said that a lack of quality strata office offerings saw strong competition emerge for stock in 2018, but while continued limited availability on the market this year had kept prices growing there was now less urgency from buyers.
 
“Reductions in interest rates should further stimulate this market but the continued difficulty in obtaining finance has slowed the pace of buyers acting,” Hadgelias said.
 
“While this hasn't affected the overall increase in capital values, which has grown 14.02 per cent compared to 2018 annual results to average $13,900 per square metre on an adjusted basis, it highlights a shift in sentiment across the market.

“The Sydney CBD Strata market continued with the same momentum of late 2018, resulting in a significant volume of sales during the first half of the year.
 
“Looking ahead, there's a lack of quality stock available to the market, which is likely to result in a reduced sales turnover level during the late part of the year.”

At a glance:

• Capital values in the Sydney CBD strata office market grow 14.02 per cent compared to 2018 annual results
• Sydney office space now averages $13,900 per square metre on adjusted basis
• Difficulty obtaining finance and lack of quality stock could slow market going forward

Mr Hadgelias said that with low interest rates and reducing yields across most investment options, many owners were now looking to hold their assets, particularly during this time where vacancies are low and face rental levels have been elevated.
 
He said capital values across most precincts recorded for 2019 continued the upward trajectory witnessed since the 2014-15 period.
 
“Over the past 12 months, the most significant increase has come from the Midtown precinct, growing 17.71 per cent on 2018 results to $13,852 per square metre, this however can be attributed to the larger number of smaller sales which often attract a premium,” he said.

Ray White Commercial NSW – Sydney Office Leasing Principal Anthony Harris said Sydney’s CBD had enjoyed robust rental growth over the past four years during low vacancy and much disruption to the city centre.
 
“Over this time where stock has come and gone from the CBD, total stock levels have remained steady, which has been the catalyst for the significant occupancy improvement and rent escalation,” Mr Harris said.
 
“Incentives have also eroded during this period, but kept stable over the past 12 months to represent 10-12 per cent on average, albeit the range substantially based on both the quality of the premises and other agreed lease terms.
 
“Over the last year prime net face rents recorded only a small 3.85 per cent increase, to average $1,080 per square metre yet within a range of $950 per square metre to $1,240 per square metre, well below double digit growth recorded for the prior couple of years.”

Harris said that Sydney continued to be the number one office market in Australia that both domestic and international funds are seeking to invest in.

“While the fundamentals of the office market continue to be sound with low vacancy, we’re seeing strong increases in face rents while the local economy continues to grow, due to increased population and job numbers,” he said.

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