The changing face of Parramatta
There is, no doubt, a lot happening in the Parramatta CBD’s office market. The growth in its infrastructure and the development of Parramatta Square is influencing dramatic changes in the office market.
Parramatta has been traditionally viewed as a low-cost solution for businesses who could not afford to establish themselves in other office markets. However today, that picture is certainly changing.
We outline below the top 3 key trends in Parramatta’s office market:
Vacancy is at a record low:
- As shown in our recent Metro Office Research and Forecast Report A Grade vacancy in Parramatta is at zero percent.
Rents are increasing quickly, and incentives are decreasing:
- Landlords are regularly reviewing their asking rents as competition decreases. Some deals are not receiving any incentives at all, with most incentives sitting around 8% – 15% net.
Tenants renewing and refitting instead of relocating:
- Over the past few months we have seen several tenants come to market who need more space or wish to upgrade, but have instead been forced to renew at their current premises and refitting. This is a result of the lack of choice of options in the market. When these tenants renew they often are experiencing considerable rental increases as well.
The market conditions in Parramatta are having a knock-on effect in other Western Sydney markets such as Sydney Olympic Park, Norwest, and Rhodes, as tenants have been unable to find office leasing solutions within Parramatta.
With Parramatta Square forthcoming development, we can expect to see further changes to the market conditions. With estimated delivery stages between 2019-2021, Parramatta Square, a three-hectare precinct right in the heart of the CBD, is one of the largest and most anticipated transformation projects in Australia today.
Parramatta Square will add over 240,000 square metres of space to the CBD. In addition to the commercial and residential space, Parramatta Square will feature world-class public space. This shared space will connect the new buildings within the development and be used for public events, and as a place to meet, interact, socialise, shop and work.
In theory, Parramatta Square should alleviate supply issues for tenants. However, the majority of Parramatta Square’s vacancy is being absorbed by larger pre-commitments, predominantly from tenants who are not located in Parramatta. Total market vacancy is forecast to decline over the short term as pre-commitments absorb any new stock. We have seen NAB commit to 42,000 square metres and Property NSW commit to 62,000 square metres in recent months.