Parramatta is quickly approaching 1 million square metres of commercial office space but what does this mean for Sydney's second CBD?
There has been a lot of publicity around Parramatta’s low vacancy rate, sitting at 3.2 per cent, which in part has been due to limited construction over the past 10 years.
However, this is rapidly changing & the next four years will see about 300,000sqm of office space added to the market, taking it from 720,000sqm to the notable milestone of 1 million sqm.
This rapid growth has been driven and facilitated by several key factors; the NSW government's decentralising from Sydney CBD; Parramatta Council's new centre for Parramatta; Parramatta Square; tenants moving from suburban office markets due to residential development; value proposition compared to Sydney CBD or North Sydney; and a shift to cater to Millennials providing a work, live, play lifestyle.
The demand for new space has predominantly come from outside Parramatta. It includes the two most recent buildings to be completed, 105 Phillip Street and 1 Parramatta Square at 169 Macquarie Street, securing NSW Education; and Western Sydney University, Water NSW and PwC respectively.
The migration west continues with 4 Parramatta Square, where over 60 per cent of the 64,000sqm government commitment will come from outside Parramatta, and 3 Parramatta Square, which has been committed to by NAB.
In the short term, there will be limited relief to the vacancy rate with the market. However, the action will heat up at the end of 2020, which is currently shaping up to provide some significant stock and prime backfill opportunities.
The first single significant Parramatta tenant move is QBE's relocation from 60 Station Street to 32 Smith Street which today presents a 25,000sqm of leasing opportunities across the two buildings. Additional Western Sydney University and UNSW pre-commitment at 6 Hassall Street will provide about 13,000sqm of leasing opportunity.
As Parramatta grows, so does demand from tenants. Link Marketing is all but locked into 6 & 8 Parramatta Square, Westpac is in the process of consolidating, the state government is expected to have locked down another 45,000 sq m by second quarter 2019.
This momentum is unlikely to change soon as the western Sydney population continues to grow, $3 billion worth of infrastructure and public spending is rolled out and we go through the Millennial shift to convenience living. In time more tenants will be drawn to Parramatta for its holistic offering and the 1 million square metre milestone will be quickly followed by 1.5 million sqm.
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Source: Sydney Morning Herald