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Office construction in Sydney expected to shift out of CBD

On Nov 12 2013
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Investment in commercial property could be the next lucrative venture for smart buyers in Sydney, ...

Investment in commercial property could be the next lucrative venture for smart buyers in Sydney, with the latest BIS Shrapnel report indicating that office stock in the city will increase by 22 per cent over the next decade - or close to 2.6 million square metres.

The report, entitled Sydney Commercial Property Prospects and Suburban Centres and Office Parks Update, highlighted a general shift towards offices in locations outside of the central business district in Sydney. Areas like Sydney CBD, North Sydney and Chatswood are expected to see a dwindling share of the office building market.

On the flip side, locations with more accessibility, site availability, affordability, and amenity proximity are expected to grow. Areas such as Parramatta, North Ryde, Norwest, Olympic Park, South Sydney, and other metropolitan markets are expected to experience the uptake of construction.

This expansion of commercial office property could be a great opportunity for investment, especially with New South Wales' projected population growth in the coming years. With so many new residents moving into the region, the expansion of job opportunities and business expansion should be expected.

Senior Project Manager at BIS Shrapnel Lee Walker said these markets were well situated to help stimulate the growth of the Sydney commercial office property market.

"North Ryde is particularly well positioned to capture overflow demand from the north shore markets over the longer term, with the availability of sites helping it maintain a rental advantage," said Mr Walker in a November 7 statement.

By 2023, Sydney CBD's share of office property in the city is expected to be around 40 per cent, with a continual decline expected to be seen over the next few construction cycles.

"Once the three office towers are built at Barangaroo, there will be few vacant CBD sites left on which to build and much of the second phase of office construction forecast will require site amalgamation," said Mr Walker.

Because of this, developers will need to increase their rent to make them a justifiable investment, forcing some tenants to move out of the city and into the outer suburbs and into newly built office complexes.

However, the report highlights Sydney CBD will always be the "pre-eminent office market" in the city.

Mr Walker stated the popularity among office occupiers and investors will, ultimately, underpin future developments in the region. However, as the suburban offices begin to develop, it could be difficult for them to retain their appeal over the long term.



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