Tight leasing conditions continue to support the North Shore office market, however the strong rental growth of the past few years has now started to moderate. Growth in sub-lease space across the Prime market has already been realised, fortunately however the limited forecast supply additions will result in rents continuing to increase albeit around CPI, demonstrating the lack of prime leasing options.
Vacancies are expected to show mixed results across the region over the next year. Some slight increase may occur in North Sydney given the influx of sublease space to the market and known vacations, before tightening. While, Crows Nest/St Leonards, Chatswood and Macquarie Park/North Ryde are likely to show a moderate decrease over the next 18 months.
Investment activity has been strong in the first quarter of 2013. The market now has better clarity of current market yields with a number of transactions increasing the upper end of the yield range, particularly for secondary stock. Given the increased levels of demand from a variety of investors, we expect that yields will tighten from this current level over the next few years, albeit slowly.
Source : Knight Frank