2024-03-18-莱坊-North_Shore_Office_Market_March_2024_9页_1mb

North Shore Office Market Summary

Overview

The North Shore office market is experiencing a significant structural shift toward quality assets, with clear demand divergence between prime and secondary grades. Overall, net absorption remains weak, vacancy rates are elevated, and rental growth is subdued despite improving sentiment and economic outlook. Key drivers include occupier upgrades, substantial new supply additions post-2023, and the potential for increased deal flow as conditions stabilize.

Key Findings

• Market Trends: High vacancy rates (e.g., 24.2% in North Sydney) and negative net absorption (-11,286 sqm in H1-2024) stem primarily from secondary market weakness. Prime assets demand is strong, while secondary assets face higher competition and vacancy.
• Rental Performance: Prime net face rents increased slightly (1.5% year-on-year in North Sydney), but net effective rents declined due to incentives (e.g., up to 37% average), leading to negative growth in prime net effective rents.
• New Supply: Record completions in H2-2023 added ~42,800 sqm of prime space, with future developments like the 55,000 sqm Victoria Cross OSD (due 2025) and projects in pipeline (e.g., Affinity Place) expected to further strain absorption.

By Submarket

North Sydney

Vacancy is relatively low at 24.2%, but negative absorption persists. Prime grade maintains tight vacancy (6.8%), with best-in-class assets outperforming. Secondary market absorption weak, contributing to negative net absorption.

St Leonards

Vacancy reaches 26.3% on record high, driven by competition from other North Shore markets. Prime grades show slight vacancy decrease, but secondary market absorption is deeply negative (-9,352 sqm). Deal flow limited due to constrained demand.

Chatswood

Vacancy at 18.8% is the lowest among submarkets, with stable absorption and net effective rent stabilization. The Zenith Tower dominates with premium rates, but overall vacancy increased.

Macquarie Park

Vacancy surged to 20.1%, the highest in a decade. By H1-2024, prime vacancy reached 21.0%, with incentives high (avg. 36-37%) offsetting nominal rent growth. New supply continues to add prime space, delaying absorption recovery.

Future Outlook

Prognosis favors gradual improvement as supply tailwinds ease post-2023. Deal flow is expected to increase with yield resets (avg. 6.3% for prime) and better alignment of vendor-purchaser expectations. Divergence between prime and secondary markets will likely intensify, with focus on quality assets for institutional investment.