The state of the North Sydney CBD office market

COVID and the resulting trend to work from home has impacted office occupancy in North Sydney, but not to the extent one might imagine. Jones Lang LaSalle senior leasing executive Amy Cordiner, who is the nucleus of their North Sydney team, tells the Sun that the vacancy rate of 17% has only risen 1-2% over the COVID period and that’s in the context of 200,000 square metres of new space at Denison, Miller and Mount Streets. James Mullan spoke with Cordiner.

SUN: What changes have you seen in the market with the end of COVID?

CORDINER: Many corporates are realising that they can right size for their business. They may not require 500 square metres, however they have the budget which allows them to reduce their spatial needs and relocate to a higher quality building. The movement to higher quality buildings is having a definite impact on secondary grade assets.

If your current office is in a secondary asset, the pure difference in moving to a prime grade building may be 20-30% more, however the positive tenant metrics in the market are making it possible.

SUN: What types of companies are attracted to North Sydney?

CORDINER: North Sydney is highly diversified in the industries that we attract. Channel 9 changed up the dynamic by bringing media & advertising & marketing related sectors back to the fore. Technology industries have always been a strong contributor to the North Sydney economy. Microsoft’s a perfect example securing approximately 10,000 square metres, and we’re noticing a lot of FinTech coming into North Sydney now.

SUN: TPG said they are moving from North Sydney to Barangaroo partly because the newer building there helps them meet their emissions and sus- tainability goals? Does North Sydney have a problem in that regard?

CORDINER: It’s happening across all markets – not just North Sydney. Sustainability and ESG initiatives are now stronger across the board. Victoria Cross, Lendlease’s over station development is designed as a net zero building and will be all-electric. Lendlease’s Blue & William development down near Shore School has very strong sustainability metrics and this will only continue in the future.

SUN: What are clients telling you about North Sydney itself, as opposed to the actual buildings?

CORDINER: It’s definitely improving on the back of new office and supporting development activity and supporting infrastructure. Retail offerings in Victoria Cross will only enhance North Sydney’s day & night-time economies.

SUN: Is there a risk of oversupply in the market?

CORDINER: New developments in the past few years have secured precommitments; 100 Mount Street was 98% committed upon completion and Blue & William is leasing incredibly well. Our vacancies are driven by those secondary-grade assets that lack landlord capital to meet the demand of tenants.

This interview was edited for length. Jones Lang LaSalle is a global real estate service firm.