Sydney CBD vacancy remains tight despite falling demand

The Property Council of Australia’s Office Market Report has revealed that Sydney CBD vacancy increased over the last six months from 3.9 per cent to 5.6 per cent, still very low by historic standards.

While the Sydney CBD recorded its lowest level of demand in 11 years for the six months to July 2020, vacancy generally remains tight, especially for premium office space,

“Sydney’s office market has traditionally been very tight and recorded some of its lowest vacancy rates in the past couple of years, which has put us in a better position to navigate the challenges of the COVID-19 pandemic being felt right across the property industry,” Property Council of Australia’s NSW Acting Executive Director Belinda Ngo said today.

“Tenant demand fell by 58,675 sqm over the six months with most of this occurring in B grade office space, whereas there was slight positive demand for Premium space.

“We saw some new supply enter the Sydney CBD with more to come over the next two years. There is 117,161sqm of new stock due to enter the market in the second half of 2020, and a strong pipeline of new office stock planned for 2021and 2022.

Office vacancies are calculated on whether a lease is in place for office space, not whether the tenant’s employees are occupying the space or working from home.

Key market indicators, Sydney CBD (aggregate)

Grade

Vacancy,

Jul 20 (%)

Vacancy,

Jan 20 (%)

Net absorption, 6 months to

Jul 20 (sqm)

Net absorption, 12 months to

Jul 20 (sqm)

Premium

3.8

3.6

1,301

20,587

A

4.7

2.6

-11,971

9,371

B

7.5

5.2

-36,864

-111,409

C

7.8

6.8

-5,225

-10,758

D

7.0

3.7

-5,916

-6,081

Total

5.6

3.9

-58,675

-98,290

“The support of the NSW Government to keep construction going and ensure that we have a strong future pipeline of work is more important than ever, not only to ensure we can continue to keep people in jobs, but also support the overall economic recovery of NSW.

“The extra support, leadership and confidence from Government needs to continue not only in improving the planning system but also in getting people back into our CBDs and into offices to activate city centres and support local businesses, creating vital economic activity for Sydney and our regional areas both directly and indirectly.”

Market analysts will be closely watching tenant demand and sublease vacancy over the next six months as the economic effects of the pandemic continues to play into office markets.

Analysis and further data for office markets in the Sydney CBD, North Shore and Macquarie Park are provided further below.

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