Sydney CBD Q107.05.2012
How would you characterise your market at the moment?
Sentiment has steadily improved since January and whilst demand has picked up over the last six to eight weeks, transactions are still taking considerable time to conclude. The market continues to lack real deal volume in the single floor size bracket (e.g. 1,000–1,500 sqm). We continue to see good activity in the sub 300-sqm end of the market – particularly from tenants seeking well-located A Grade and B Grade buildings, ideally with fit out in place. We have recently seen an increase in demand in the 3,000–5,000-sqm size range with a focus on A Grade buildings and expect we will see some further relocation as a result.
Whilst tenants of 1,000–2,000 sqm are currently spoilt for choice, demand from occupiers seeking 5,000–20,000 sqm will see opportunities for medium to large tranches of contiguous space reduce significantly. With such limited new supply coming to the market over the next three years, we expect larger users will continue to come to the market earlier to avoid missing opportunities.
Are there any trends you are noticing among the tenants you are talking to?
Tenants continue to drive cost savings and greater efficiencies as justification for a move. Whilst we are still seeing tenants taking the opportunity to upgrade, they are often doing it on the back of consolidations to drive business efficiency. Beyond that, the real concern is future growth, so it becomes a very fine balancing act between not taking too much space up front and needing the ability to expand in the future.
What do you think will be the biggest influence on your market in Q2?
Global stability continues to be a key influencer/distraction although we would suggest that occupiers have been used to dealing with this for some time and decisions will be made with a view to what is best for the business.
What will rents and incentives do in Q2?
Off the back of recent and current deal activity in the prime market, we would expect to see effective rent growth over Q2 as occupancy levels improve and larger contiguous options reduce. This will be a function of both face rent growth and incentives tightening depending on the particular market segment and asset.
What should landlords do to adapt to these market conditions?
Tailoring deals to a particular tenant’s needs and restrictions (e.g. global policy) continues to be a key objective. It’s very important to assess each opportunity individually and seek direct engagement with decision makers in order to structure acceptable outcomes.
Head of Leasing, New South Wales
Recent Leasing Deals
Market Balance, as at March 2012
Download a PDF of the Sydney CBD Q112 Market Overview