Did you know, there is 5,079,899sqm of total office stock across over 700 commercial buildings to accommodate approximately 9,000 tenants in the Sydney CBD. And did you know, of these 9,000 tenants, 58% of the market occupies smaller sized suites with areas from 0-300sqm.
What’s the current trend?
According to Colliers International’s database, from January 2016 – May 2017 there has been over 285,000sqm of office space leased in the Sydney CBD across 480 transactions. 60% of tenants occupy suites of less than 300sqm.
So what’s in store for 2018 ?
There will be a continued demand for suite occupiers. According to our data, there will be approximately 850 tenants with lease expiries from June 2017 to December 2018 totalling 597,500sqm. From our analysis, 48% of tenants occupy areas from 0-300sqm, 18% occupy 300-500sqm, 17% occupy 500-1,000sqm, 15% occupy 1,000-5,000sqm and 2% occupy areas from 5,000sqm+.
What has caused this trend?
Approximately 73,954sqm of secondary grade stock has been withdrawn from the market in 2016 due to the Government acquisitions for the Metro Railway and for residential conversions. The current vacancy is sitting at 6.2% below the ten-year average of 7.2% according to the latest PCA figures. Smaller size secondary tenants have been left displaced and are actively seeking office space in the market. As demand exceeds supply, we see B Grade rents increasing by 60% from 2016 and landlords reducing incentive levels. As rents rises, tenants are forced to either downsize its office space, decentralise to the suburbs or consider alternative flexible workplace arrangements. This trend is expected to continue into 2018 and 2019 due to the limited supply of office stock that will come onto the market.