A ‘perfect storm’ of market and economic conditions is creating ideal selling and buying conditions of strata office buildings on Sydney’s North Shore, according to CI Australia.
“The commercial property market is currently being shaped by a number of factors, namely a return of confidence off the back of the Liberal Election win, the lowest interest rates on record, and the high levels of Government infrastructure investment including the Sydney Metro,” said Nick Lowry, Associate Director of Investment Sales at CI. “The impact of these factors have also been particularly evident in the strata office market on the North Shore, where there is a lack of stock currently available for sale.”
One of the reasons for this lack of stock has been the buy in from major developers into the strata office market, buyers which have included Lendlease and Dexus. The attraction to this asset class has been enhanced by the change to NSW compulsory acquisition laws, from requiring 100% of owner agreement to sell to just 75%, said Mr Lowry.
“Developers have been active in acquiring both negative and positive control within strata buildings that have been identified as future office development sites. Strata assets generally transact at a lower price point than freehold assets too, due to this comparative lack of control for the buyer and lesser building quality,” he said.
There has also been a reduction in strata office supply available for investors, due to unresolved town planning initiatives surrounding Sydney Metro Stations, in areas such as Crows Nest. Mr Lowry said this had effectively ‘mooted’ the supply of multiple strata schemes across the North Shore.
Owner occupiers within strata buildings also have attractive incentives to sell at the moment. “Owners located within strata buildings that are earmarked for redevelopment are in some cases being offered strong prices and compensation to relocate their businesses. And with interest rates at 1%, some owners are willing to pay a premium to re-enter the market. As such, this is having a significant flow-on effect to the values of strata properties across the North Shore,” Mr Lowry said.
CI Australia has a strong track record in selling strata office assets. Most recently the firm sold the asset located at Suites 11 & 12 / 136 Willoughby Road, Crows Nest, for $9,000/sqm + parking, a result which is in line with freehold pricing. In some cases, strata properties are achieving higher capital values than freehold properties, added Mr Lowry.
Overall, the North Shore commercial property market remains an attractive destination for buyers, developers and tenants. Vacancy has continued to trend downwards and sits at 6.5%, with the market also remaining a beneficiary of the momentum and vacancy of just 4.1% in the Sydney CBD market.
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