Amid the large residential superlot sale in St Leonards where nine houses were sold for a combined $66 million, the office sector in the area is also on the radar, with close to 10,000 square metres of lease deals negotiated in recent months.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The team at JLL sold the superlot, where new apartments are proposed and CBRE and Colliers International are also in the throes of selling the remaining lots. The sales are due to the rezoning of the area by the Lane Cove Council.
According to CBRE, for the office sector, although much of the recent focus has been on St Leonards' residential potential, there is continued demand from both new and existing office tenants.
Recent deals include a 1800-square-metres lease involving Carloans.com.au (a part of Eclipx Group) and a 4164-square-metre commitment from Primary Health Care. A number of large lease renewals have also been finalised to tenant such as Ramsay Healthcare (2500 square metres) and Next Media (1800 square metres).
CBRE office services director Stefan Perkowski said the focus was on well-positioned, quality buildings with a high level of tenant amenity.
"We're continuing to see genuine buy-in from occupiers targeting St Leonards. Tenants that have been displaced as a result of residential conversions are taking the opportunity to remain in the area and upgrade their accommodation. We've also seen a number of new tenants enter the market to capitalise on the rental differential between St Leonards and nearby markets such as North Sydney," Mr Perkowski said.
Stockland has been one beneficiary of the recent tenant activity, having leased circa 5000 square metres of available space in 601 Pacific Highway over the past 12 months. The building is now 100 per cent occupied, with one of the newest tenants being Carloans.com.au, a part of Eclipx Group.
The finance broker, who was represented by Andrew Kane from CBRE GWS, will relocate to the building next month from Macquarie Park after striking a five-year lease deal over two whole floors.
Challenger has also capitalised on the current tenant interest, after signing medical group Primary Health Care to The Forum at 203 Pacific Highway.
"There is an inbuilt culture among many St Leonards tenants who like the work/life balance that the location affords if they have a high proportion of staff living on the north shore," Mr Perkowski said.
"The rental differential is another draw card, with rents for equivalent A-grade buildings some $100-$150 per square metre below that of North Sydney."
Withdrawals of stock for residential conversion have been another boon for existing office landlords. CBRE research highlights that at least 36,000 square metres of stock is likely to be withdrawn over the next four years, representing 10.3 per cent of the current market.
This involves five secondary buildings: 18-20 Atchison Street (1818 square metres); 472 Pacific Highway (11,728 square metres); 504 Pacific Highway (11,083 square metres) and 33 Herbert Street (6065 square metres).
Numerous additional owners remain in talks with council in regards to development applications for potential conversions, which could remove another 29,000 square metres of stock.
As a result of conversions, CBRE's current forecast is for the St Leonards vacancy to dip as low as 4.5 per cent in 2017.
"As the overall market size declines, we expect that the occupier market will continue to tighten, shoring up occupancy in remaining buildings and placing landlords in a more favourable position," Mr Perkowski said.
This has underpinned investor interest in existing assets such as 201 Pacific Highway and more recently 207 Pacific Highway.
