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Sydney’s second central business district, Parramatta, is experiencing a major gulf in demand between office assets less than five years and their older counterparts, according to new findings from JLL.
The global real estate brand has found that the vacancy rate for assets less than five years old in the city shrank to 8.3 per cent over the second quarter of this year. Contrastingly, secondary-grade office assets are expected to see their vacancy rate hit 50 per cent by year’s end.
The trend has been largely driven by a great migration of tenants from B-grade and secondary stock on the outskirts of western Sydney into better-quality, newer premises in the bustling pockets of central Parramatta, where prime gross effective rents dipped 0.5 per cent quarter-to-quarter to $348 per square metre.
Ben Lalic, JLL senior director of office leasing in Parramatta, stressed anyone looking to move into these prime assets cannot sit on their hands any longer.
“Sitting tenants looking at the flight to quality need to move now,” he said.
“Lots of new development has come online in the past few years, but there’s no more space being added to the market,” Mr Lalic explained. JLL reported no office completions occurred during the first half of the year, while one office withdrawal occurred due to the space converting for another use.
JLL is tracking 15,400 square metres of office stock under construction across two projects in Parramatta, with the larger of the two located at 85 Macquarie Street sitting at around 10,000 square metres and expected for completion later this year.
JLL noted the headline vacancy rate in Q2 2023 was 23.5 per cent, a decrease of 1.1 percentage points over the quarter, with a total of 10,700 square metres of net absorption over the quarter driven by two large occupiers reabsorbing space in the market.
Notably, the prime grade vacancy rate fell slightly for the second time since late 2021, dropping 0.7 points to 18.6 per cent.
The real estate brand reported two key office transactions occurring in Sydney’s second CBD during the first six months of the year. Both deals totalled $67.6 million, with the larger of the pair, the sale of 9 George Street by Brisbane Investment Corporation to a private investor, valued at $49.6 billion. Additionally, 144 Marsden Street, sold by a private investor to the Unity Church of Australia, changed hands for $18 million.
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