End In Sight

End In Sight

Like clockwork, every year end the CRE industry experiences a flurry of activity which slows as people begin to wind down. It starts in October once the kids go back to school, gets interrupted in early November, and then all of a sudden there are 6 weeks to go.

There are so many moving parts to each project and reaching the end requires contributions from many along the chain. However, as people slowly start to peel off, parts of the chain start missing and tasks are kicked into next year.

As 2024 comes to a close, here are some of our observations for Sydney over the past year:

Office markets

• Flight to quality is now flight to value. As the Premium space leases up, rents are increased and incentives decreased, pushing tenants to turn to good quality stock (A and B grade) offering much more affordable alternatives.
• It’s now the battle of the B’s – B grade and Backfill (includes A’s). As the flight to value continues, the A and B grade markets are now competing heavily for the same reduced number of tenants and this increased incentives to new levels.
• C’s – still nothing but wait until next year. The more tenants vacate these buildings, the more owners will need to inject capital or sell. This is an Australia-wide trend.

• The boom is over and vacancy increased from below 1% to over 3%, rents stopped increasing and are now falling in some cases, and incentives have returned. The market has been rebalancing and adjusting all year.

•  The Air Trunk trade has shone an even brighter spotlight on the data centre market.

With 3 weeks still to go, we are focusing on what can get done and preparing for the year ahead.