2023-04-21-莱坊-Parramatta_Office_Market_February_2023_6页_3mb

Parramatta Office Market Summary (March 2023)

Core Content Overview

The Parramatta office market is undergoing significant transformation due to record levels of private and public sector investment. This has led to an expansion of the office stock base, making Parramatta the second-largest CBD in New South Wales by office stock size. The market is characterized by a mix of prime and secondary grade properties, with notable changes in vacancy rates, rental growth, and investment activity.

Key Market Indicators (January 2023)

• Vacancy Rates: Prime vacancy at 17.8%, Secondary at 18.3%, Total at 18.1%.
• Net Absorption: Positive in Prime, negative in Secondary.
• Yield Trends: Yields softened by 31bps for Prime and 21bps for Secondary, with the Prime yield arbitrage compared to Sydney CBD at 113bps.

Major Developments Reshaping the Market

• Parramatta Square (Walker Corporation):

  • Total development: 2.8 billion AUD.
  • Completed towers: PSQ6 (71,000 sqm), PSQ8 (53,000 sqm).
  • Commitment rate: ~80%.
  • Major tenants: NSW Government, Property NSW, ATO, Westpac, Deloitte, Link Market Services, Regus.

• 6 Hassall Street (Charter Hall/WSU):

  • Size: 28,722 sqm.
  • Commitment rate: ~70%.
  • Major tenants: UNSW, WSU, Pepper, CBHS.
  • Incentives: 32.5% for Prime, 35% for Secondary.

• 85 Macquarie Street (Holdmark Property):

  • Size: 8,899 sqm.
  • Under construction, due for completion by mid-2023.
  • Anchored by Commonwealth Bank of Australia.

Market Trends and Opportunities

• Vacancy Reduction: Vacancy rates have slightly decreased to 18.1% in January 2023, down from a record high of 19.3%.
• New Supply Impact: The influx of new supply over the past two years has led to increased competition and downward pressure on net effective rents.
• Flight to Quality: With more prime space available, secondary grade owners may invest in refurbishment and upgrades.
• Tenant Activity: Positive absorption in the Prime market, with new tenants and existing occupiers upgrading premises.

Investment Activity and Sales

• 2022 Investment Volumes: Hit a decade-low, with only $136.9 million transacted across two assets.

  • 20 Smith Street: Sold for $87.2 million, with a core market yield of 4.96% and a 1.5-year WALE.
  • 9 George Street: Exchanged for $49.6 million, with a core market yield of 6.16% and a 2.8-year WALE.
  • 32 Phillip Street: Sold for $66.0 million, with a core market yield of 5.34% and a 1.7-year WALE.

• Investor Interest: Both onshore and offshore investors are showing interest in Parramatta due to its long-term strategic growth potential and government-backed infrastructure.

Future Development Pipeline

• Upcoming Projects:
  • 150 George Street: Refurbishment approved, expected completion in H1 2023.
  • 140 George Street: DA approved, expected completion by 2025+.
  • 2 Valentine Street: DA approved, expected completion by 2025+.
  • 87–91 George Street: DA approved, expected completion by 2025+.
  • 32 Smith Street: Completed in H1 2021.
  • 6 Hassall Street: Completed in H2 2021.
  • PSQ6 and PSQ8: Completed in H2 2021 and H1 2022 respectively.

Recent Tenant Commitments

• KPMG: 3 Parramatta Square, 3,000 sqm, term pending, start date Q3-23.
• ATO: 6 Parramatta Square, 17,551 sqm, term pending, start date Q2-23.
• Gamuda: 60 Station Street, 2,646 sqm, face rent $595/sqm, 5-year term, start date Q3-22.
• Procare Group: 18 Smith Street, 286 sqm, face rent $560/sqm, 3-year term, start date Q3-22.
• CBHS Health and Pepper Money: 6 Hassall Street, 1,534 sqm each, face rent $630/sqm, term pending, start date Q3-22.
• JLL: 32 Smith Street, 1,042 sqm, face rent $660/sqm, 8-year term, start date Q2-22.
• Department of Home: 101 George Street, 13,974 sqm, face rent pending, 10-year term, start date Q2-22.

Conclusion

Parramatta's office market is experiencing a renaissance driven by significant investment and infrastructure development. While vacancy rates remain high, the availability of prime grade space and the flight to quality trend offer opportunities for both new and existing tenants. Yields are softening due to higher debt costs, but the market's long-term growth prospects and strategic position make it an attractive investment destination. The next major wave of development is not expected until 2025, providing a window for market participants to capitalize on current conditions.