A demand for commercial assets in Sydney, particularly in the inner east, is expected to continue to boom in 2017 according to one agency.
2016 saw almost $370 million worth of commercial property sales in Sydney’s inner east, and research conducted by Ray White Commercial NSW suggests this will continue to grow in 2017.
“The inner east market (which includes Surry Hills, Redfern, Darlinghurst and Woolloomooloo) offers a wide array of investments at varying price points,” Samuel Hadgelias of Ray White Commercial NSW said in Between the Lines – Inner East Sydney Commercial Report February 2017.
“Given its proximity to the Sydney CBD, demand is strong from both smaller investors interested in retail or office suite holdings together with larger investors and developers looking for office buildings, larger retail holdings and possible development sites,” said Mr Hadgelias.
“This demand is unlikely to subside into 2017 given the low interest rate environment and appetite for quality, well-located assets which will result in further expansion of the capital value range achieved and continued lows in investment yields,” he said.
The report showed there were more than 150 commercial sales in the inner west in 2016, with 45 per cent of those taking place in Surry Hills.
“With access and cost of financing still reasonably low coupled with increased demand for stable investments for private investors; retail assets have achieved yields as low as 4.00 per cent across the inner east while office assets can range anywhere between 5.50 per cent and 7.00 per cent,” said Mr Hadgelias.
The report showed that the average values achieved in Redfern are currently $11,059 per square metre, Darlinghurst is currently slightly higher at $11,593, Surry Hills is higher still at $13,592 and Woolloomooloo was at the top with $13,988 per square metre.
“Looking at office assets alone, this average is closer to $16,000 per square metre keeping in mind potential redevelopment opportunities, while retail represents $11,430 per square metre on average with a great variation in this asset class depending on access,” said Mr Hadgelias.
“In addition to potential redevelopment, the strength of the office market in the city fringe can further be explained by the tight Sydney CBD vacancy environment, currently just 6.20 per cent (January 2017),” he said.