New Office Supply Coming to Sydney

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According to CBRE, a wave of new office supply is on the horizon for Sydney's commercial market, providing a plethora of prime grade options in the nation's largest CBD.
 
CBRE's latest Viewpoint, Sydney Office: The next supply cycle...have no fear highlights how the New South Wales capital is facing historic vacancy lows over the next two years as the city awaits the next tranche of supply.
 
CBRE Research Manager Alexander Tan said while competition would increase for space between 2018 and 2019, new supply would provide greater opportunities in not just the Sydney CBD but across metropolitan markets.
 
"Beyond 2020, the next supply cycle will provide more options for office tenants across Sydney, with strong competition expected for those looking to secure tenants in major projects such as the CBD's Wynyard Place, Quay Quarter Tower and North Sydney's 100 Mount Street and 1 Denison Street," Mr. Tan said.
 
Other projects scheduled for completion over the next three years include Parramatta Square stage three and four; Australian Technology Park in Eveleigh; 11 Talavera Road and Macquarie University in Macquarie Park.
 
CBRE's Senior Director, Advisory & Transaction Services - Office Leasing, Jenine Cranston, said the Sydney CBD would remain competitive due to strong tenant demand.
 
"While competition from other markets may provide some degree of competition, Sydney CBD has historically shown a strong magnetism for local and offshore brands. It is the place businesses want to be," Ms. Cranston said.
 
"Attraction and retention of talent is considered with far greater weight than in the past, which has meant tenants will more frequently approach options more holistically and not merely on cost. It is evident that HR has increased its power base and the days of the CFO's sole cost focus have diminished somewhat."
 
Mr. Tan said the risk of a supply glut between 2020 and 2021 was remote due to the tight vacancy profile across Sydney's office markets over the coming years.
 
"Based on our forecasts, the supply pipeline will be subdued from 2017 - 2019 and net absorption follows a similar low growth profile," Mr. Tan said.
 
"Beyond 2019, however, new supply as a proportion of total stock will average 1.2% (the long-term average) and well below previous supply peaks of 1.5% from 2008-2009 and 1.7% from 1999-2001."
 
The report highlights the possibility of an outlier increase in net absorption over 2020-2021, when new supply is due; using autoregressive integrated moving average (ARIMA) model - a time series forecasting tool.
 
"Consequently, with the 'upside surprise', total vacancy across Sydney's office markets could be closer to 3% as opposed to our current forecasts of 6%-7%," Mr. Tan explained.