Sydney CBD Today
Earlier this month, the Property Council of Australia (PCA) released its Office Market Report for the second half of 2024. The sentiment in the room was pensive almost as if expectations have been or at least were starting to reset.
The second half of 2024 showed mixed activity. In one corner, prime space was enjoying a day in the sun. In another, incentives were high, confirming the flight to value. The battle of the B’s raged on; B Grade, Backfill, wannaB’s and shouldB’s. (Watch this space in 2025 and 2026)
The end of the year was slower than normal as more caution crept into the economy for countless reasons (national and international) but ended on a positive note. This has translated into a healthy level of activity at the start of 2025 and everyone is hoping it lasts beyond Q1.
The PCA statistics for the Sydney CBD office market for the first half of 2024 are:
- Stock – 5,300,562 – increased from 5,177,437 m2
- New supply – 164,552 m2 and withdrawals of 41,427 m2
- Vacancy – increased from 11.6% to 12.8% – bumping up and down in the 11-13% bracket
- Absorption – net absorption of positive 46,234 m2 up from 4,630 m2 – half of this take was sublease being withdrawn from the market
- Absorption – 6 month net absorption average in the 5 years to January 2020 (pre-Covid) was positive 17,006 m2
- Absorption – 6 month net absorption average in the 5 years since January 2020 (Covid+) has improved to negative 12,691 m2 – still almost 30,000 m2 of absorption per 6 month period down from the pre-covid period
With vacancy now consistent and absorption remaining subdued, we see a challenging yet good year ahead. The battle of the B’s is the one to watch as that is where the value is for CRE tenants.
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