Market vacancy in Sydney's Parramatta expected to decline in the short term: Colliers
Total market vacancy in Parramatta is forecast to decline over the short term as pre-commitments absorb any new stock, according to Colliers International’s latest Metro Office report.
“Stage 1 Parramatta Square, which came online at the end of last year, was fully pre- committed by Western Sydney University.
Taking into consideration the development pipeline, 105 Phillip Street (delivery circa 2018, approx. 25,000sqm) is fully committed to the Department of Education and Stage 4 Parramatta Square (delivery circa 2019, approx. 62,000sqm) is fully committed to Property NSW.
These tenants will relocate from Darlinghurst and Sydney CBD which will likely contribute to above average positive net absorption for the period.
Looking further ahead, NAB has fully committed to 42,000sqm at Stage 3 Parramatta Square (delivery circa 2020),” the report stated.
2020 and 2021 should see Parramatta vacancy rising Colliers says.
“Notable vacant space is likely to be available in 2020 and 2021 with Parramatta City Council (126 Church Street), the Office of State Revenue (87 Marsden Street), and the Department of Planning and Environment (10 Valentine) intending to vacate 5,800sqm, 4,000sqm and 5,000sqm respectively.
Additionally, The Commonwealth Bank of Australia will vacate 101 George Street and 150 George Street in 2022 relocating to the Australian Technology Park (ATP) in Redfern, creating backfill space of approximately 40,000sqm.
As a result of the abovementioned movements, by early 2020 vacancy is forecast to fall to 3.3 per cent before increasing to 6.9 per cent by the end of 2021,” the report advised.
Colliers says that A Grade vacancy is likely to remain at full occupancy in the short term, with the secondary market, particularly B Grade, tightening at a faster rate.
“For the second consecutive period A Grade space remains at full occupancy, fuelling strong rental growth.
Over the last 12 months, net face rents have increased 5.8 per cent, with net effective rents increasing 10.4 per cent as incentives fell three percentage points to 15 per cent.
B Grade vacancy has fallen to 6.2 per cent, from 6.8 per cent, resulting in even stronger rental growth,” the report commented.
Net effective rents has increased over the past 12 months due to reduction in incentives Colliers says.
“Net effective rents increased 16.9 per cent over 12 months largely due to the significant 7 percentage point reduction in incentives, falling to 16 per cent.
With a strong pre-commitment market, we anticipate net effective rental growth to exceed historical averages for A and B Grade space of 3.6 per cent year on year and 2.5 per cent year on year respectively.
Over the next 12 months, net effective rents for A and B Grade are expected to grow by 10 per cent and 13 per cent respectively with the average annual growth rate over the next three years forecast at 6.7 per cent (A Grade) and 7.4 per cent (B Grade),” the report stated.
A 25,000 sqm office building at 105 Phillip Street, Parramatta (above) has been listed for sale.
A 1563 sqm office at 87 Marsden Street, Parramatta (below) was sold recently in April this year.
Similarly a 2024 sqm office at 36 Egerton Street, Silverwater (below) was sold recently in April this year for $3.96 million.
Small office space include a 120 sqm office at 9 & 10/70-72 Railway Parade, Granville (below) has been listed for between $1.2 million to $1.3 million.
