Combining a beautiful mix of culture, entertainment, art, global eateries and commercial activity, Parramatta is a bustling suburb which has become the centre of all the attraction. Located a few kilometres away from Sydney CBD, it is a significant business hub which is ruling the commercial real estate sector. Currently, the suburb has been ruling the roost as the undisputed leader in the segment with the lowest office vacancy rate in the country.
It has surpassed the prominent contenders like Melbourne and Sydney to reach the top spot. Thus if you are planning to invest in commercial real estate for sale in Australia, then Parramatta is a safe choice which will bring the desired return on investment. The record-low vacancy rates have increased the rental prices, and the growing demand for new offices ensures continuous growth in the coming years. Here is why many of the major investors are going all out to get a share of the hot properties listed in Parramatta.
Affluent Investors Are Eyeing Parramatta
From property companies to business moguls, Parramatta has captured the imagination of the elite club as a wide range of new developments are underway in the suburb. One of the big names making headlines in the region is that of developer Lang Walker who has recently welcomed the first tenants in his $3.2 billion Parramatta Square project.
The premium property has been already pre-leased due to its plush build quality and world-class amenities. All the top companies and NSW government are vying for these splendid office properties in the region, including KPMG, Deloitte, QBE Insurance, etc. Some of the investors, such as Daniel Grollo, who had stepped out of the market a few years back, are now coming back into the game as A-grade properties are gaining momentum in the region.
Rising Absorption Rates
A huge chunk of the stock has been withdrawn from the area in the past year, especially in the secondary assets. Moreover, the demand for office spaces is growing at a rapid pace which has resulted in the rising absorption rates. Also, the need to look beyond the highly-priced Sydney CBD has triggered an interest in the areas that are primed for growth.
Parramatta is expected to experience a substantial development in its infrastructure, transport and health department, which will further boost its position in the market. The A-grade office spaces are being highly sought-after after the vacancy rate dropped by 0.2% in the second half of 2018. Consequently, Parramatta has gained recognition for becoming a tight prime office market in the country as the vacancy rate has plummeted in these properties significantly.
Declining Vacancy Rates
With premium properties being limited in stock and high employment rates soaring demand for offices, a huge wave of absorption is being witnessed in B-grade properties. However, myriad new developments are in the pipeline and will be opening their doors to tenants in 2020.
By the end of this year, the suburb will witness the addition of 46,000sqm office space for NAB and another 26,400sqm for GPT. Stage 6 and 8 of Parramatta Square will be bringing another 200,000sqm into the market by 2022. There are speculations about the expansion of Westfield, which can further increase the stock by 112,000sqm in the coming few years.
Naturally, all these factors have contributed to the declining vacancy rates, which have come down to 2.7%. Although the stock has increased over the years, the demand for high-quality offices has outpaced the supply. The A-grade properties are experiencing a peak in demand at 0.6% vacancy rate as many tenants are looking for affordable options outside Sydney that offer remarkable facilities.
The vacancy rate will stay in the same league for the next two years, even though new properties are coming into the market. The reason behind this is that they are all pre-leased and committed to many government tenants and big corporations. So the rising demand will not let the rents fall.
Gain In Rental Income
The drop in vacancies has led to rental growth in Parramatta in both premium and B-grade properties due to limited supply in the market. Although the rent has increased in these office buildings, it is still much more cost-effective than the overpriced Sydney CBD properties. The Sydney CBD is equally in-demand among the high-net-worth investors who have brought the vacancy rates down in the metropolis while the rents are still sky-high.
Consequently, savvy buyers are finding Parramatta to be a more budget-friendly and viable option for investment. Parramatta CBD prime market’s gross rent stands at $650 per sqm at present. This figure has taken a leap of 4.84% in the past year. The same is true for the secondary properties which stand at $550 per sqm.
The rents will maintain an average growth and the refurbished secondary properties are all set to gain from the boom. According to the rules of commercial real estate investing, putting money in regions which promise infrastructure development and magnified demand is a wise decision. As a result, the major investors are being lured by builders in Parramatta.
Tagged As The Next Largest CBD Market
With large office spaces coming up in the next five years in Parramatta, the suburb is expected to become the second-largest CBD in the country. The population of the region is also expected to rise with more people looking for affordable accommodations close to Sydney. The other CBD markets are showing signs of saturation which further signals a positive response towards the Parramatta offices.
The investment activity has escalated in the last year as more and more institutional investors are gearing up to put their money in the high-growth region. This is a welcome change from the usual private investments which had become a mainstay in the area. It has amplified the sales volumes and showcased a mixed presence in the market.
Thus Parramatta is fast becoming a favoured destination among both local and international investors for all the right reasons. The popularity of the region can be gauged from the fact that Mirvac acquired 75 George Street for $86.3 million with the initial passing yield of 5.51%. The exceptional deals struck in the past few months and the institutionalisation of ownership has amplified the interest of investors in the area, which is waiting to unveil its quality assets.
Offering premium quality properties at an affordable price is making Parramatta score over Sydney CBD and lower North Shore. If you too are looking for commercial real estate for sale in Australia, then this is the best time to buy a high-class office space that will bring a rewarding yield.
Sophie Barrett is an experienced real estate marketing professional with a specialisation in commercial property market. She has a Masters degree in marketing from the esteemed Melbourne Business School and has several property management certificates to her credit. Her shrewd marketing policies and business acumen have led to the most rewarding property deals in the major capital cities of Melbourne, Sydney and Perth. She is a popular name in the real estate market and has been serving the industry for almost two decades now. CommercialProperty2Sell is proud to partner with her for some astute discussions and advice on the booming sector.
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