2021-09-14-莱坊-Parramatta_Office_Market_September_2021_6页_4mb

Parramatta Office Market Summary (September 2021)

Core Content

The Parramatta CBD office market is undergoing a significant transformation due to record levels of private and public investment. This development is expected to position Parramatta as Sydney's second-largest CBD by office stock size, following the Sydney CBD. The market is experiencing increased vacancy rates, which present opportunities for new entrants and local businesses looking to upgrade their premises.

Key Insights

• Unprecedented Investment: Significant private sector investment and state government infrastructure projects are reshaping Parramatta into an emerging CBD.
• Vacancy Levels:
  • The overall vacancy rate in July 2021 reached 10.1%, the highest in over 10 years.
  • Prime market vacancy increased to 11.4%, up from 1.2% in July 2020.
  • Secondary market vacancy stabilized at 9.1%.
• Net Absorption:
  • Total market net absorption was 21,657 sqm in July 2021.
  • Prime market net absorption was 27,495 sqm, while secondary market saw a -5,838 sqm net absorption.
• Supply Growth:
  • Office stock increased by 22% since July 2016.
  • A 9% jump in supply over the past 12 months.
• Rental Trends:
  • Prime net face rents have remained unchanged since January 2020 at $588/sqm (gross face $707/sqm).
  • Secondary net face rents at $476/sqm (gross face $593/sqm).
  • Incentives have risen, with 27-30% in prime and secondary markets, respectively, leading to a decline in net effective rents.
• Yields:
  • Prime yields are steady at 5.00-5.75%, with the top end likely to achieve 5%.
  • Secondary yields range from 6.00-6.50%.
  • A 105bps positive yield arbitrage exists between Parramatta and Sydney CBD.

New Development Impact

• Walker Corporation's Parramatta Square:
  • Already added 130,000 sqm of prime office space in the past three years.
  • PSQ6&8, the final stage, will add 120,000 sqm and is under construction, expected to be completed by H2 2022.
  • Achieved 60% commitment rate with major tenants including Property NSW, Link Market Services, Westpac, and Deloitte.
• GPT's 32 Smith Street:
  • Completed 26,400 sqm with a 75% commitment rate.
• Charter Hall/WSU's 2-6 Hassall Street:
  • Near completion, with 40% pre-commitment to UNSW and WSU.
• Scentre Group's Parramatta Westfield:
  • Approved for 105,000 sqm of commercial GFA, expected to be completed by 2025+.

Recent Transactions

• 9 Wentworth Street: Sold for $64 million by Mayrin Group to Parramatta Council, with a 5.07% yield.
• 27 Argyle Street: Sold for $73.9 million with a 5.56% yield.
• 16-18 Wentworth Street: Sold for $40 million with U/D yield.

Market Dynamics

• Tenant Commitments:
  • Keshab Accountants, AIPC, Coleman Greig, QBE, and Property NSW have committed to new or renewed spaces.
• Investment Activity:
  • Limited over the past 18 months, with 9 Wentworth Street as the only major transaction in 2021.
• Infrastructure Projects:
  • Stage 1 of the Parramatta light rail is underway, with expected completion by 2023.
  • Sydney Metro West project has commenced, with site works around Horwood Place.

Competitive Landscape

• The market is attracting local and offshore investors due to its growth potential and improved infrastructure.
• The increasing institutionalisation of ownership and new quality stock are reinforcing Parramatta's appeal as an investment destination.

Summary

Parramatta's office market is on the cusp of significant growth and transformation, driven by both private and public investment. The rise in vacancy, particularly in the prime market, is creating new opportunities for market entrants and tenants seeking to upgrade their spaces. While rental growth has halted, the market remains attractive due to competitive yields and the potential for future development. The upcoming infrastructure and new developments are expected to further solidify Parramatta's position as a key CBD in Sydney.