Sydney to see five new office projects this year

The projects will yield over 85,000sqm of new space.

According to JLL, 1 Elizabeth Street (62,000 sqm) & 39 Martin Place (30,157 sqm) completed over Q2 2024 in the Sydney CBD. There is 223,554 sqm under construction (4.2% of total stock) in the market. A further five assets will complete in 2024 totalling 85,444 sqm.

There were five completions across the metro markets totalling 121,021 sqm. JLL data indicated that the largest were 235 Pyrmont Street, Pyrmont (12,800 sqm) and 85 Macquarie Street, Parramatta (10,000 sqm). There is 221,785 sqm under construction across the metro markets.

Here’s more from JLL:

Sydney CBD net absorption totalled 10,007 sqm over Q2 2024. This was driven by Macquarie Group increasing their footprint when they consolidated from 1 Shelley Street (30,688 sqm) and 1 Martin Place (11,474 sqm) into 1 Elizabeth Street (55,695 sqm).

Positive net absorption was recorded in five out of the ten office markets tracked across Sydney. The largest positive result was in the Sydney CBD (10,007 sqm) while the largest negative result was in North Sydney (-9,496 sqm).

Yields soften in the Sydney office markets

The Sydney CBD recorded prime net face rent growth of 0.5% over Q2 2024. Prime incentives decreased slightly to average 34.8%. There has been a slowdown in rent growth over the year as tenants are more cautious in a weaker economic environment.

Prime yields softened across Sydney, with midpoint prime yield softening ranging from 31 bps in the Sydney Fringe to 100 bps in Chatswood. The Sydney CBD softened by 25 bps on the lower end and 50 bps on the upper end to range between 5.50%–7.00%.

Outlook: Supply spike likely to increase vacancy

The Sydney CBD vacancy rate is likely to increase further in 2024. Tenants are likely to continue to show a preference to the Core precinct, but deals are also occurring in the Western Corridor with some attractive financial metrics being offered.

We are near the trough of the yield cycle. Domestic and offshore groups have a strong preference for CBD assets and suburban Sydney is more challenged with a shallower pool of buyers. Further yield softening is anticipated for the remainder of 2024.