2015 delivered fantastic net absorption in the Sydney CBD, with recently released figures from the Property Council of Australia indicating over 157,000 square metres of space was taken up. The strongest since 2007.
Cushman and Wakefield’s NSW Managing Director, Phillip Rockliff said, “2015 was a terrific year and we are set to see tightening incentives and real growth in face rents with each new lease negotiated”.
Whilst NSW’s improved economic position has been key to the recovery, one aspect of the growth not commonly noted is the impact of the weaker Australian dollar. Cushman and Wakefield’s National Research Director John Sears, noted that the Australian dollar has fallen against the US dollar by around 35 percent since 2011 and 10 percent over 2015.
“With wages and rent making up around 52 percentage of total costs for Australian professional service firms, the softer dollar has made Australia a more attractive location for multinational firms expanding in the region. This means that for an offshore based tenant, opening an office in Sydney is potentially around 35 percent cheaper than it was a few years ago” said John Sears.
James Patterson, Cushman and Wakefield’s Chief Executive for Australia and New Zealand, noted the increase in demand for space from US and Chinese businesses including tech firms who either expanded or took up new space in Sydney.
“Chinese firms, positioned around the development industry, were not generally locating in the Sydney CBD, but are driving demand in areas like Chatswood and Rhodes” said James Patterson. He also highlighted that 2015 was another very strong year for commercial property transactions with turnover of around $30 billion.
“With the Australian dollar expected to remain at around US$0.70 over 2016, offshore demand for Australian commercial property by both occupiers and investors is expected to remain strong in 2016.”
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Office sector riding high on strong demand