Sydney CBD vacancy rate to fall to lowest level since GFC

New Metro line stations to cause significant withdrawals in office space.

Over 60,000sqm of commercial space is to be withdrawn over the next two years in the Sydney CBD to make way for the new underground metro line, prompting forecasters to predict that the vacancy rate will decline to its lowest level since the GFC, falling to 5.23 per cent by January 2017.   

“The compulsory acquisitions include 39 Martin place, 55 Hunter Street, 175 Castlereagh Street and 12 Castlereagh Street,” said Research Analyst Sas Liyanage, Research Analyst at Colliers International.  “These withdrawals are expected to cause additional downward pressure on a declining CBD vacancy rate.”

Sydney CBD Vacancy

The withdrawals, all secondary class assets, are expected to increase the demand for A and B grade space as displaced tenants look to secure space.

“Approximately 78 per cent of the stock to be withdrawn for the CBD stations will be from B-grade properties,” said Cameron Williams, National Director of Office Leasing at Colliers International.  “Moreover, the B-grade vacancy, currently at its lowest level since January 2009, is expected to further tighten as tenants are pushed from the metro markets as a result of residential conversations, a scarce pipeline and additional withdrawals for major infrastructure projects.”

The Sydney CBD market has experienced significant levels of absorption in recent years, with over 113,684 square meters of space taken up in the 12 months to July 2015. This is expected to persist as a softer dollar and seventeen year low wage growth provides tailwinds for Sydney’s strengthening service sector.

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