Nearing the end of the cycle: Record levels of office tenancy

PARRAMATTA received record levels of office tenant activity in 2021, softening the increase in vacancies as large levels of new supply come online.

Positive net absorption of 68,000 sqm was recorded in the December quarter by JLL, the strongest quarterly result since the firm began tracking the market in 1990, driven by strong pre-commitment levels within new completions as well as strong activity within the small tenant market. Net absorption is tipped to moderate in 2022 but will remain positive.

Parramatta’s headline vacancy rate fell to 0.8 percentage points to 12.1% over the three-month period, and prime grade vacancy rate come down from a peak of 21.8% in June to 14.0%.

JLL’s office leasing Parramatta senior director, Stephen Panagiotopoulos said financial services, insurance, and SME tenants had led the immense growth in the number of private sector businesses taking up space in Parramatta, driven by the recent multi-billion-dollar infrastructure and amenity boom, while the federal government has also been a major factor.

“With projects such as Parramatta Square, Powerhouse Museum, Metro West and Light Rail lines all under construction, these projects have drawn large scale businesses across infrastructure, engineering, and development to the precinct, with smaller businesses following in their footsteps,” he said.

It will this year become Australia’s first non-CBD market to reach one million sqm of total stock. Just over 250,000 sqm of office space has completed in the market over the five years to 2021, reflective of 38% growth and making it the fastest growing market out of 19 tracked by JLL Research.

Scentre Group received state government approval for its $500 million proposal to build a 105,000 sqm office tower above Westfield Parramatta last year, while the NSW government also committed to overhauling planning controls for Parramatta’s CBD, hoping to create 50,000 new jobs and two million sqm of new commercial space in the process.

Two assets under construction

JLL’s office leasing Parramatta senior director, Ben Lalic said Parramatta is near the end of the current development cycle, with only two assets under construction totaling 60,000 sqm of stock.

“With such high current net absorption levels, businesses need to look to secure space in the next 10 months or will have to wait two or three years for future quality stock to come online, otherwise take up existing older refurbished A-grade stock,” Lalic said.

The next completion in the Parramatta office market will be 50,000 sqm at 8 Parramatta Square, part of Walker Corporation’s $3.2B development. Westpac has committed to 20,000 sqm, while Deloitte recently signed up for a 10-year lease there and Link Market Services will also be moving in.

Another 10,000 sqm will be completed in the September quarter at 85 Macquarie Street, where the Commonwealth Bank pre-committed to 2,000 sqm, while half of Charter Hall’s 6 Hassall Street will be -occupied by Western Sydney University.

Major leasing deals have included the Department of Home Affairs at the nine floor, A-grade  101 George Street, consolidating three existing Home Affairs office buildings in Parramatta and Sydney’s CBD into one site.

Complete Credit Solutions and Workspace 365 each took whole floors of 1,323 sqm at 60 Station Street, known as the Eclipse Tower, while JLL itself has just relocated its western Sydney office to 1,000 sqm of prime-grade office space at GPT’s recently completed 32 Smith development.

City of Parramatta Council paid $64M in September for an office building on Wentworth Street that will become its administrative head.

Image: Parramatta CBD.

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