Sydney's metropolitan office market is at its healthiest level in many years, underpinned by a demand for space from an improving economy, at a time when residential developers are also in an aggressive expansion phase.
It has led to high occupancies and improved rents, although that is more from lower incentives being offered in a contract, than real growth, according to agents.
One site that has been in the spotlight is the newly built, A-grade commercial office building in Haymarket, which is now fully leased.
The nine-storey office building at 180 Thomas Street which recently received a 5 Star Green Star Office v3 As Built rating from the Green Building Council of Australia (GBCA), recently signed Amadeus, who have taken up 4040 square metres of space across levels seven, eight and nine on a 10-year lease.
JLL's director of office leasing for Sydney, Andrew Westaway, managed the leasing appointments for the building, which also include Employsure, who have taken up 3040 square metres on levels five and six on a seven-year lease andGovernment Property NSW (GPNSW) who have committed to 1592 square metres on level four with a six-year term.
There is also Coffee Roasters, who are occupying both retail outlets on the ground floor at Shop A and B under a 10-year term.
"Haymarket's office sector is seeing a solid level of demand as a southern extension of the Sydney CBD. It is an attractive area for businesses due to its close proximity to the city, being just 1.4 kilometres from the city's centre," Mr Westaway said.
"The level of interest in the Haymarket area is increasing across the board. This is due to urban initiatives such as The Goods Line, which has been compared with the New York High Line, and the recently completed UTS Dr Chau Chak Wing Business School, which was designed by Frank Gehry – one of the world's most influential architects."
In the latest Sydney Suburban Office Market report from Knight Frank, its says that coupled with limited supply and above average permanent withdrawals, a further reduction in vacancy rates over 2015 and 2016 is anticipated.
Nick Hoskins, director NSW research at Knight Frank, said this is expected to see rental growth in line with CPI, however A-grade incentives should stabilise.
In the report, Mr Hoskins says, with the CBD rental cycle entering the early stages of an upturn on the back of improving demand, it is expected the quantum of suburban tenants moving inwards will start to reduce in 2015 and into 2016.
"Suburban vacancy rate has reduced from 8.8 per cent to 8.1 per cent in the 12 months to January 2015. Further falls are expected given very soft supply outlook," Mr Hoskins said.
The demand for suburban office sites, is also reflected by the activity at Parramatta, where Growthpoint and Charter Hall have been increasing their exposures through the purchase of existing assets such as the Justice precinct and the redevelopment of the new University of Western Sydney, respectively.
