Sydney's western corridor is currently the most tightly held precinct in the CBD office market and is expected to remain tightly held over the next three years while Lend Lease’s $6 billon Barangaroo development takes shape, according to a new Pulse report from Jones Lang LaSalle.
The western corridor comprises the strip of offices incorporating Hickson, Shelley and Kent roads and the future Barangaroo development, from Circular Quay to Darling Harbour.
As the graph below shows, the vacancy rate in the western corridor has fallen steeply since the early 2000s, when it was above 16%, to under 8%.
The highest vacancy rate is in the core CBD market.Click to enlarge
“No developments are scheduled to complete in the western corridor until the first stage of the Barangaroo development in late 2015," says Jones Lang LaSalle.
“There will, however, be backfill space created as a result of KPMG and Lend Lease relocating to the International Towers.
“Both tenants will vacate assets at the end of first generation leases. Jones Lang LaSalle expects that a high proportion of the good quality backfill space at 10 Shelley Street and 30 Hickson Road will be leased prior to lease expiry.”
According to Jones Lang LaSalle, the western corridor has experienced the strongest growth in stock over the past 15 years.
Major buildings to complete over the past six years include: Westpac Place at 221-293 Kent Street (73,620 square metres), 1Shelley Street (31,225 square metres) and 12 Shelley Street (14,848 square metres).
As a result, the western corridor’s share of the Sydney CBD office market has increased from 19.2% in 2001 to 23.2% in mid-2012.