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Ben Parkinson
Ben Parkinson
  • 1 Minute Read
  • 13th November 2012

Sydney set for office space surge

Office space vacancies in Sydney, Australia, are projected to rise dramatically over the next five years, as a series of new-build and renovation projects come to a head simultaneously.

Real estate investment agency Lend Lease Group (LLC) are set to add approximately 400,000 sq m of space to their portfolio, including a new $6.2bn financial centre in the Barangaroo docklands redevelopment, according to Bloomberg.

The country’s largest property developer will open the first two commercial buildings in 2015, adding 166,000 sq m per tower, before an additional 100,000 sq m is completed in 2016.

That alone amounts to almost half of the 870,000 sq m that has come to the market over the past two decades and will push vacancies up 3% to 12% by 2016, the highest levels since 1999 according to UBS estimates.

Mark Lacey, Sydney-based national director of office leasing at Colliers International, said: “We’re quite confident of having a substantial level of pre-commitment across the three towers well before any of the other new space is delivered.

“And a lot of the space vacated as tenants move into Barangaroo could be withdrawn from the market.”

A further 140,000 sq m of refurbished space is planned for the old financial centre at Martin Place, according to property broker Jones Lang LaSalle Inc.

Elsewhere, key tenants - such as the Macquire Group Ltd - have already indicated that their workstation requirement is likely to fall as jobs are re-shuffled. Macquire have cut roughly 1,625 jobs (11% of its staff) in the year to September, whilst Westpac Banking Corporation lost 2,035, or 5%, of staff in the same period.

The most populous city in Australia, in which over 65% of the nation’s economic activity takes place, has borne the brunt of the recession, with steep job losses following corporate collapses in the mining and finance industries.

Daniel Ekins, managing director for Asia-Pacific region securities at Deutsche Bank AG’s RREEF real estate unit, explained: “The financial-services sector is slowing and they’re a key occupant of offices.

“Rental rates are unlikely to grow significantly and vacancy rates are likely to increase.”

Mining company acquisitions have fallen to their lowest levels since 2009, with purchases dropping A$23.1bn so far this year compared to the same period in 2011.

Financial and insurance companies across the country have shed over 9,800 jobs in the year to August, roughly 2.3% of those employed in the sector. Projections suggest a further 7,000 could be lost by the end of 2014.