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Sydney CBD vacancy rate to fall to lowest level since GFC

Over 60,000 square meters to be withdrawn for new train stations

Over 60,000 square meters of commercial space is to be withdrawn over the next two years in the Sydney CBD to make way for the new underground metro line. Major acquisitions include 39 Martin place, 55 Hunter Street, 175 Castlereagh Street and 12 Castlereagh Street. These withdrawals are expected to cause additional downward pressure on a declining CBD vacancy rate. Colliers International forecasts indicate the vacancy rate will decline to the lowest level since the GFC, falling to 5.23 per cent by January 2017.

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 Approximately 78 per cent of the stock to be withdrawn for the CBD stations will be from B-grade properties. 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. Furthermore, the 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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