North Sydney Office Market

North Sydney Office Market

Inspecting office buildings on a Monday morning in North Sydney is similar to doing the same in Melbourne. Catching the train across the Harbour Bridge to the CBD for afternoon inspections, one notices the real difference between the 2 office markets.

Only 3 years ago North Sydney vacancy was below 10% and absorption was positive. Now vacancy is above 20% and average absorption over the last 4.5 years has been negative. With Victoria Cross coming online mid-2025, vacancy will be around for some time. But check out the retail at the Metro station underneath it if you get a chance.

What happened? Same as elsewhere; work from anywhere, less office space required, and slow demand.

Property Council of Australia’s latest Office Market Report North Sydney statistics for the first half of 2024 are

• Stock 941,214 m² – slight increase from 936,914 m². North Sydney is now the 9^th largest office market in the country. It used to be the largest non-CBD market in Sydney but is now slightly smaller than Macquarie Park (~ 4,000 m²) and only just bigger than Parramatta (~ 9,000 m²)
• New supply – 4,300 m² of new stock was added and approximately 55,000 m² (~6%) to be added next year
• Vacancy – decreased from 24.2% to 23.5% of which 2.2% is sublease down from 3.0%
• Absorption – net absorption for the first half of 2024 was positive 9,994 m²
• Absorption – 6 month net absorption average in the 5 years to January 2020 was positive 865 m²
• Absorption – 6 month net absorption average in the 4.5 years since January 2020 has been negative 4,221 m²

• The market is close to the point where repurposing may be a solution for some of the older buildings. North Sydney is a prime candidate for residential conversions like Milsons Point was years ago, especially if there are views
• Recent asking rent reductions and increased incentives are one way to avoid more vacancy
• Flight to value – you don’t have to overpay to upgrade to a better building

Like for so many other cities around the world, it certainly is a sign of the times.