Sydney suburban offices to outperform CBD
Rental and capital value growth is brighter in for Sydney's major suburban markets than the CBD over the next two years, research reveals.
Research and forecasting firm, BIS Shrapnel, reported average A grade net stated rents will rise by between 10 and 15 per cent in North Sydney, Parramatta and North Ryde, with capital values set to grow by 16 to 18 per cent in the two years to December 2016.
While CBD prime net stated rents are expected to increase by four per cent, with priced rising by 11 per cent.
BIS Shrapnel senior project manager, Lee Walker, said the forecast reflected strong growth in the suburban office market over the last 12 months, with domestic and international investors taking advantage of low interest rates.
"The combination of firming yields and outperforming rental growth will see average price growth for A grade buildings in North Sydney, North Ryde and Parramatta exceed growth of prime CBD values," he said.
"There is logic to buy. Some people think that it's difficult to find a property, but based on our forecasts of rents and prices, we think there is still value in Sydney's suburban markets."
Walker said vacancy rates would be a key factor in driving value in the suburban markets, with BIS Shrapnel forecasting that by December 2016, vacancy rates in North Sydney and North Ryde set to match those in Parramatta at about six per cent.
"In the CBD, seven new office buildings will add 360,000m2 to stock between now and December 2016, keeping the vacancy rate around current levels (seven to eight per cent)," BIS Shrapnel reported.
"In contrast, only about 80,000m2 is due across North Sydney, Parramatta, North Ryde. This should be easily absorbed as most is pre-committed to tenants moving in from outside these markets.
"In net terms, the new supply will be less because of withdrawals for residential conversion."
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