Sydney CBD Office Market

10 July 2020,

I predicted that incentives in Sydney CBD office space would increase significantly as agents attempted to hide the fall in demand caused by Covid-19 and the lockdown although I expected it to happen more rapidly. After dealing with Covid-19 and the lockdown for several months incentives appear to have reached a more reasonable level. Reported incentives for prime Sydney CBD office space are around 24 to 27%.

CBRE calculated that incentives for prime commercial space had increased to 24.3% by the end of June and Cushman & Wakefield calculated 27%. I consider this to be at the mid to lower end of the range of market parameters given the current circumstances and believe that incentives will continue to rise this quarter and in the December quarter unless face rents start to fall.

Leasing Prime, A Grade and B Grade buildings will be challenging throughout the remainder of 2020. Owners of lower grade buildings will likely encounter significantly higher vacancy rates and in the absence of long term leases should be considering redevelopment potential including, where appropriate,  conversion to residential in my opinion.

Michael Wright

(c) Aspect Valuation Services