North Ryde Caught In Hit Or Miss Mode
Sydney Morning Herald
Saturday June 7, 2003
There are conflicting reports being issued about the North Ryde commercial sector, with agents saying leasing activity is improving while researchers believe the opposite.
The confusion is enough to suggest the underlying market is in turmoil with one sector of the area performing well and the other feeling the pressure of a weak leasing sector.
Owners of property report that, like all segments of the property market, location and quality still equate to strong demand.
Of those developer and landlords who have both, their properties are well let and rents are high.
But for the remainder of the market, where demand is weaker or a new office block has opened next door, there are tough times ahead.
In a recent leasing deal, Richard Pearce, the director of metropolitan business space at CB Richard Ellis , negotiated Datacom's tenancy of 4300 square metres at 15 Talavera Road, North Ryde, on a rental of $200 a square metre, net and flexible term.
He said the deal for the building, which is owned by the National Australia Bank Superannuation Fund, reflected a turnaround for North Ryde.
``Due to the ever-changing nature of the IT industry, the tenant has taken a flexible lease structure with the ability to contract and subtract over the two floors," Mr Pearce said.
``North Ryde is still a prime target for tenants. Inquiry for the market is still very strong, but decision-making slow. The tide is slowly changing."
But researchers at LandMark White , a national independent property adviser and valuer, said after three years of ``sizeable construction activity" the North Ryde office market will experience flat rental growth throughout the remainder of this year, with only moderate increases next year.
Scott Young, an associate director for LandMark White, said the large amount of new space supplied to the market over the past three years, combined with the abundance of development sites, would dampen rental growth prospects.
``Since 2000 there has been 186,000 square metres of new space supplied and despite tenant enquiry levels improving of late, developers are seeking high levels of pre-commitment before proceeding with new projects."
LandMark White said that, as with most commercial office markets across Sydney, leasing activity in North Ryde was ``sluggish" over the second half of last year and as at January the overall vacancy rate was 17.3 per cent, up from 14.4 per cent in June last year.
The research showed that as of January North Ryde was Sydney's fourth largest office market with 54 buildings comprising a total of 441,875 sq m of net lettable area or 6 per cent of the total office market in the Sydney metropolitan area.
The firm said the majority of vacancies within North Ryde was in primary space with a 20 per cent vacancy rate (up from 16 per cent in June last year) compared with 14 per cent in secondary space (up marginally from 13 per cent in June last year).
``These statistics have resulted in a competitive leasing market in which incentive levels are often over 20 per cent with variation depending on the size and quality of the space," said Mr Young.
In the current market a major issue for existing and new assets will be the favourability of the lease being negotiated and the review patterns. The tenants currently have the upper hand, however, high initial incentives may be preferable to lower fixed reviews as the latter will have longer term affects on value.
``Given the strong demand for property which has seen yields and IRR's firm, an initial upfront incentive allows for the core value of the asset to be maintained," Mr Young said.
``As economic conditions and white-collar employment growth improve, a lack of development sites along the north shore market is expected to shift demand to the North Ryde precinct."
© 2003 Sydney Morning Herald