Parramatta is full.
The capital of western Sydney now stands at zero office vacancy for its A-grade properties and with demand still strong, tenants are moving into B and C-grade sites just to get a presence in the market.
The Property Council of ‘s latest Office Market Report, released on Thursday, shows that Parramatta continues to be one of Sydney’s strongest emerging commercial office markets with total vacancy remaining steady in the six months to July 2017.
There is still a zero vacancy rate for A-grade office space with high demand driving the vacancy rate down and underlining the need for more premium supply.
Property Council NSW executive director Jane Fitzgerald said Parramatta continued to grow and develop and ”we are now seeing the market steady into a long-term trend of growth – vacancy rates in C-grade stock dropped again, albeit to 11.6 per cent, with only slight rises in vacancy rates in B and D-grade stock”.
According to Houssam Yakzan, Savills senior analyst, research and consultancy, Parramatta’s leasing activity is expected to remain development led as limited vacancy strengthens demand for new stock. This will likely be boosted by the development of the Badgerys Creek airport.
There are “reports of Walker Corporation and Parramatta Council exploring the change of use of 8 Parramatta Square – known as Aspire Tower – from residential to commercial. [This] could see the 600-plus unit development replaced with 71,000 square metres of A-grade commercial floor space,” Mr Yakzan said.
“If approved, Parramatta Square will be well positioned to capture much of the remaining government requirement for space.”
He said benefiting from the decentralisation of state government departments over the past 24 months, the NSW government continued to reduce its presence in the Sydney CBD, targeting a 100,000sq m reduction in office space by 2021.
According to Savills, to date the NSW government has pre-committed to more than 87,000sq m of space with more than 5800 department jobs expected to move from the CBD. Pre-committing to 4 Parramatta Square, being developed by Walker Corporation, are the Department of Planning and Environment, the Office of Environment and Heritage, the Environment Protection Authority and the Department of Finance, Services and Innovation. The move is set to occur in the first half of 2019.
Other commitments include the Department of Education at the Dexus??? development at 105 Phillip Street, for 25,500sq m of A-grade office space, which is expected be delivered early next year.
Charter Hall has also developed the new Western Sydney University’s vertical campus at 1 Parramatta Square.
CBRE director of office leasing for western Sydney, Stephen Panagiotopoulos, said Parramatta had seen a reduction in vacancy with major transactions occurring during the past three to six months.
“Most of the vacancy is in B and C-grade stock, with the largest contiguous area being about 1200sq m. This is driving up rents and providing excellent opportunities for lessors with upcoming expiries over the next 12 to 24 months,” he said.
“Demand remains strong, however with the lack of opportunities tenants are looking further afield or staying put.”
Mr Panagiotopoulos said the next development cycle was gaining good momentum with many owners exploring future potential not only in Parramatta but also in Bankstown, Liverpool, Penrith and the inner west, which were all attracting tenant demand.