NSW’s infrastructure boom is driving increased demand for leased office space from engineering and construction firms across the state.
NSW now has more infrastructure projects underway than any state or territory in Australia, with new public transport networks, roads, schools and hospitals in delivery or in planning. According to CBRE Research, NSW infrastructure projects have doubled in value from $40 billion to $80 billion since 2016, with Sydney leading the country in these projects.
CBRE’s office leasing director Stuart McSorley has seen the flow-on effect with an increased level of inquiries and recently completed lease transactions.
Mr McSorley said: “Over recent months, there has been a significant upturn in office lease enquiry, with an average size of 2,000sqm from engineering and construction companies. This has resulted in a number of recently completed office lease transactions, ranging in size and location.”
Namely, John Holland, one of Australia’s leading engineering contractors appointed to the Sydney Metro rail project, has taken on a number of office leases across Sydney CBD, St Leonards and surrounding areas with a total footprint of over 8,600sqm. Most recently, John Holland leased 3,000sqm at 100 Christie Street, St Leonards at a rate of $280 per square metre, in addition to the 5,600 plus sqm leased across three different sites in the Sydney CBD.
The Sydney Metro project – a $30 billion public transport project – is expected to open up opportunities to increase capacity for office markets such as Norwest, Chatswood and Macquarie. The project will complete in five stages, with Stage 1 anticipated for completion in 2019.
According to CBRE Research, new office supply will be closely linked to major metro rail hubs such as Pitt Street, Barangaroo Central, Victoria Cross (North Sydney) and Central Station. This new office supply is scheduled to be available for tenants from 2020.
CBRE’s North Sydney office leasing team, led by Stefan Perkowski, has received a number of inquiries for North Sydney and surrounding suburbs, with Bouygues Construction and Golder and Associates actively seeking spaces of up to 2,000sqm in either North Sydney, St Leonards and/or Chatswood.
In the Sydney CBD, prime effective office rents increased 4.5% in the second quarter of 2018, in line with quarterly rises experienced in 2016 – a record year for Sydney’s CBD office market.
In Sydney’s outskirts, there is also an upturn in demand, particularly locations within proximity to the WestConnex project.
Demonstrating this, CBRE’s Brendan Shipp and Stuart McSorley facilitated LendLease taking 4,000sqm at 185 O’Riordan Street, Mascot over five years. In other transactions, Leightons has taken 3,900sqm at 201 Coward Street, drawn to the property’s proximity to WestConnex.
“Whilst much of Sydney’s infrastructure pipeline focusses on unlocking the city, office markets which were once comparatively isolated will see a massive boost in their population catchments including Rhodes, Parramatta, Silverwater and Strathfield,” Mr Perkowski said.
Late in 2017, Built – a privately owned construction group – leased 350sqm in Macquarie Street Parramatta, following its appointment to construct the first instalment of the $2.4 billion Parramatta Square development, in partnership with the Obayashi Group. Additionally, Orrcon Steel has relocated its NSW sales office from Glendenning to Erskine Park, taking on a three-year lease for 396sqm; and moving its warehouse to Auburn.
Craig & Rhodes, a leading Sydney surveying, engineering and project management firm, recently moved into Rider Ave in Rhodes, taking on five-year (with five-year option) lease on close to 1,000sqm of space.
“Sydney is well on the way in its transition from a ‘CBD and surrounding suburbs’ city, towards a ‘multiple CBDs’ city. Completion of WestConnex will also help unlock the trade corridor between Port Botany and Sydney’s industrial west,” Mr Perkowski added.