North Sydney office market yields are at all time lows: CI Australia

Investors in North Sydney remain predominately offshore, with cross-border purchasers accounting for more than two thirds of total investments this year to date, according to the latest report from CI Australia on the North Sydney market.

They found that of the $1.53B invested into commercial assets in the North Sydney CBD last year, Canadian funds represented the largest portion of investment by dollar volume, followed closely by investors in Hong Kong and Singapore.

An influx of coworking spaces can be observed in North Sydney over the last few months, with the expansion of companies such as WeWork & Regus, an additional 7,000 sqm has entered the market, bringing the total up to 23,700 sqm.

The introduction of coworking would likely have the largest impact on the smaller end of the market, with vacancy of secondary suites already rising over the last few months. In the long run, these spaces may even assist in fostering healthy competition, leading to increased flexibility and shorter terms for tech tenants.

CI said, "boosted by the low-interest rate environment, prime yields on commercial real estate in North Sydney are currently at an all time low."

"Recent transactions have seen fully-leased yields in the low 4% range - levels on par with those observed in the Sydney CBD."

"Following substantial growth in rents over the last 3 year, rental levels are now tending towards stability and will continue to increase with the rates applicable to annual review," they noted