Sydney CBD net office absorption hits record highs since Q2 2015 | Real Estate Asia

Sydney CBD net office absorption hits record highs since Q2 2015

Absorption hit 53,600sqm in Q3.

According to a JLL report, Sydney CBD net absorption totalled 53,600 sqm over Q3 2024 – this was the strongest quarterly result since Q2 2015. 

This was driven by broad based large tenant (>1,000 sqm) demand, multiple centralisations from metro markets as well as small tenant leasing (<1,000 sqm).

Here’s more from JLL:

Five out of the 10 Sydney office markets recorded positive net absorption. The largest result in the metro markets (excluding the CBD) was Macquarie Park (7,852 sqm) and the weakest result was the Sydney Fringe (-16,559 sqm).

Four office assets will complete in Q4 2024 totalling 77,200 sqm

In Q3 2024, 32-36 York Street (7,948 sqm) was completed. There is 300,900 sqm of stock under construction, representing 5.7% of the total CBD stock. Four office assets (77,200 sqm) will complete in Q4 2024, including Parkline Place, 252 Pitt Street (47,835 sqm).

There was one completion in the Sydney metro markets: Wunderlich, Surry Hills Village, 399 Cleveland Street (3,150 sqm). Pre-commitments included The Agency Eastern Suburbs and Aje Athletica. There is 219,800 sqm of stock under construction in the metro markets.

The Sydney CBD Core precinct is performing strongly

Sydney CBD prime net face rents grew by 1.6% over the quarter. Prime incentives reduced to 34.4%. There is divergence between precincts, with decreases in incentives being recorded in the Core whilst increases are being recorded in Midtown and the Western Corridor.

Prime yields softened across Sydney to various degrees. Midpoint yields were flat in Macquarie Park, Parramatta, Sydney Olympic Park and Sydney South while St Leonards had the greatest softening (37 bps to 7.88%). CBD midpoint yields softened 7 bps to 6.32%.

Outlook: Vacancy to increase in Q4 2024

The Sydney CBD vacancy rate is projected to increase in Q4 2024 as new supply comes to market and creates new or backfill vacancy. Sydney CBD Core precinct incentives have likely reached their peak as quality options remain very sparse in the precinct.

The Sydney CBD is near the trough in the cycle for prime yields. Metro markets have recorded a stronger degree of prime softening through the cycle but are projected to trough at the end of 2024 as well.
 

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