Sydney North Shore Office Market Continues to Climb


After five years of decline, North Shore office stock is again on the rise with Sydney CBD's strong leasing market spilling over to buoy the area.

Office markets in Sydney’s North Shore comprise the out-performing suburbs of North Sydney and Macquarie Park, in addition to the smaller hybrid markets of Chatswood, and Crows Nest-St Leonards.

Collectively they amount to roughly 45 per cent the size of the Sydney CBD.

Global real estate group Cushman & Wakefield's latest report on Sydney's North Shore Office Markets identifies a precinct "rejuvenation" is under way in North Sydney, led by the development of new office towers at 1 Denison Street and 100 Mount Street – both of which are well-positioned to benefit from the addition of Victoria Cross Station and the Sydney Metro in 2024.

[Related reading: North Shore Offices in High Demand]

Over the long term this transport infrastructure is expected to make the North Shore both more accessible and more attractive to prospective tenants.

Despite increasing accessibility, the withdrawal of secondary grade stock continued as residential developers looked to take advantage of Sydney’s booming housing market.

The smaller markets of Chatswood and Crows Nest-St Leonards now face somewhat of an identity crisis with an increased residential presence. On the other hand, Cushman and Wakefield point out that the quality of office stock, particularly in North Sydney, is improving rapidly.

The report found that in North Sydney, current prime grade net face rents are circa $690 per square metre, with gross incentives around 25 per cent.

The Crows Nest-St Leonards precinct is slightly more expensive at $550 per square metre compared to Chatswood’s $505 per square metre. Both have average gross incentives of circa 23 per cent. In Macquarie Park, prime grade net face rents are circa $360 per square metre, with net incentives circa 25 per cent.

The Property Council of Australia in July 2017 reported Macquarie Park vacancy rate increased 140 basis points to 8.5 per cent over the past year, although it remains significantly below the 11.2 per cent recorded in mid-2014.

On the investment front, the North Shore markets attracted strong activity with numerous assets exchanging over the year. In the second and third quarters there was an increase in assets for sale, contributing to $1.62 billion in sales volume.

[Related reading: Centuria Fund Spends $200m on NSW Office Assets]

Yield spreads between prime and secondary grade stock compressed over the year as residential developers made plays to acquire sites with development upside.

Cushman & Wakefield anticipate that Sydney metropolitan sales volumes will remain strong over the next 12 months as yield compression continues, albeit at a slower rate.

The report flags strong demand from domestic and other foreign investors, all operating in a long-term low interest rate environment.

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