Lack Of Supply Saves City Market

Lack Of Supply Saves City Market

Sydney Morning Herald

Saturday September 6, 2008

Carolyn Cummins Commercial Property Editor

THE 2007-08 reporting season highlighted that while there is some movement in vacancies in the Sydney central business district, the lack of supply is expected to save the market from collapse.

In the latest Knight Frank report, the real estate company's NSW research manager, Selina Poyner, said vacancy levels in the CBD rose by 58 basis points to 4.3 per cent in the six months to July, still much less than the 10-year historical average of 7.4 per cent.

"Comprising some 4.69 million square metres of office stock across five precincts, the Sydney CBD market has increased around 17 per cent in the past 10 years, representing some 689,581 sq m," Ms Poyner said.

"While vacancy reached an 18-year low in January of 3.7 per cent, which was driven by three years of strong tenant demand and a shortage of supply, this has slightly increased to 4.3 per cent, the result of an increase in new supply levels and an easing in tenant demand.

"In fact, demand for space in the CBD slowed by 73 per cent in the first half of 2008, compared to the same time in 2007, with net absorption of 23,486 sq m recorded for the six-month period."

Ms Poyner said that a significant issue affecting the demand of office space in the CBD was uncertainty in financial markets, with many corporate tenants placing expansion and relocation plans on hold until the economy looked more favourable.

But for those tenants still at their desks, they are also having a big say in the type of offices in which they work.

Sydney office tenants have a high knowledge of green building rating schemes and the highest expectations in the country for green ratings in their buildings and tenancies, according to the findings of the Colliers International's 2008 Office Tenant Survey.

The independent primary research project surveyed 270 large office tenants occupying space of 500 square metres or more in a head office location across the country. Interviews were conducted in May and June.

One new building that is incorporating all issues important to staff is GPT's Workplace 6, in Pyrmont. It is the new headquarters of the internet giant Google.

Colliers International's commercial research director, Felice Spark, said the survey findings proved business decision-makers were waking up to the importance of wellbeing in the workplace, and environmental sustainability was playing a much greater role in workplace selection and design than it did three years ago.

"There has been a huge upsurge in the awareness and demands for better working environments by tenants across the country, in particular in regards to environmental sustainability," Ms Spark said.

The key findings cover expectations regarding workplace relocation and design, the importance of building selection in staff attraction and retention, changes in staff culture and tenants' attitudes and demand for environmental sustainability in their workplace.

Colliers International's national director of office leasing, Cameron Williams, said this finding was likely to be a direct reflection of the greater proportion of Sydney tenants that employ specialised property professionals within the organisation.

"The head offices of most of Australia's major insurers and the big overseas banks are based in Sydney, and they are the ones leading the charge," Mr Williams said.

"Owners that aren't considering the latest thinking of tenants will get left behind by those that are making the effort to understand what tenants really want, particularly in the current economic environment," he said.