Sydney is now the financial capital of Australia. This is in no way to decry the Melbourne market, which historically held this mantle for over 100 years, and which, along with Sydney, forms the southern half of the axis of Australia’s premier office property markets.
What may surprise many, though, is both the strength and outlook of the ‘other’ Sydney CDB, namely Parramatta.
The harbour city
There are many contributing factors to the positive outlook for the Sydney CBD market.
The most obvious is being on the supply side: it has almost nowhere to go. Surrounded by water on three sides, the only potential growth path is south, or knock down and rebuild.
But on this journey one quickly intersects with the residential precincts of Redfern, Surry Hills and Chippendale which (barring a revolution in the heritage laws) are quarantined from change; Central railway station; and finally a major residential inner-urban renewal in the form of the multi-billion dollar Central Park development on the old Kent Brewery site.
On top of this we have a ‘revolving door’ of sorts in the tier 2 and tier 3 CBD office buildings which, instead of proving the fodder for new office development, are being reborn and rebuilt as mid- and high-end residential. Around 20 sites currently fall into this category. And they are spread throughout the CBD.
Barangaroo is going to add some 300,000 square metres of premium office space over the next few years, but that’s about it. Importantly too, the majority of this mostly Sir Richard Rodgers designed new space is pre-committed.
The Baird government, having already achieved its aim of restoring NSW to number one in the economic growth stakes, is now armed with a hefty new mandate to keep on keeping on.
This not only includes Barangaroo and the Packer integrated hotel complex but Sydney's western harbour is being transformed into a distinctive and dynamic new waterfront, business and leisure district to be known as the Bays precinct.
Sydney is transforming, and at the heart of this transformation is Darling Harbour, home to the new world-class convention, exhibition and entertainment venue, a luxury five-star hotel, and a vibrant commercial and residential urban space called Darling Square.
In short, the outlook is for continued organic growth in valuations for the downtown Sydney office market, with leases now headlining at around $800 to almost $1,200 per square metre for premium space. More likely, however, is an above-average up-tick in values, due to the aforementioned factors.
As more than interested observers, with $13 billion dollars of commercial and industrial property under our care nationally, we at Charter Hall are currently quite focused on investing in the Sydney CBD, such is our positive view of its short, medium and indeed, long-term future.
But where to next?
Our commercial gaze is in no way restricted to just this office market location. We are also very bullish about the CBD of Australia’s earliest inland European settlement, originally known by the local indigenous inhabitants as Burramatta, (meaning 'head of waters', or 'place where eels lie down') but now, of course, as Parramatta.
Much has been expected of this second city for a long time, but it has been dogged by false starts, unrealised dreams, awkward planning and the fluctuations of several economic cycles. However, if a ‘sea-change’ is possible for an inland city, one is definitely underway here.
Consider the following: An activist and entrepreneurial council is committed to urban renewal on a grand scale and has the backing of the NSW state government, whose premier also happens to be the Minister for Western Sydney.
The focus of attention is two-fold. First, is the creation of the long-envisaged Parramatta Square fronting the southern end of Smith Street, which will be graced by at least five commercial and residential towers.
Parramatta Council has just announced the signing of a $1.2 billion contract with Australian developer Walker Corporation to build three towers embracing the grand new civic space, the tallest residential tower in NSW, to be known as Aspire, comprising 700 apartments, hotel and retail, and two commercial towers
We at Charter Hall are pleased to be already working alongside Parramatta Council, currently developing one of these five towers to be occupied by University of Western Sydney (UWS).
The development, the first of its kind for UWS, will also contribute significant public space to the new square that is already being referred to as western Sydney’s Martin Place.
On completion, the square will include 150,000 square metres of high-end commercial space and will accommodate 18,000 workers. It will be the hub of a CBD that features commercial rents on a par with Melbourne CBD levels and one that is growing faster than both North Sydney and downtown Sydney.
A few blocks north, the Parramatta River is also the subject of plans ranging from the realistic to optimistic.
A 20-year plan to make the historic waterway a second urban focal point includes the construction of Parramatta Quay to replace the existing ferry wharf, a new cultural precinct, a redeveloped Riverside Theatre, boardwalk, new bridge and, incredibly, a city beach complete with sand, beach furniture, and boat dock. The timetable for the latter is 2025.
With the $16 billion WestConnex road link, the $8 billion Northwest rail link, a new international airport at Badgerys Creek and a new billion dollar light rail into Parramatta, all in active planning mode rather than being dreamt about, Greater Western Sydney is a hive of infrastructure activity.
Its GDP is greater than Singapore’s. Its epicentre, Parramatta has the lowest vacancy rate of any major CBD in Australia.
It's the new capital of big thinking and big action. Maybe that’s why they called the region’s new AFL team the Giants.
In the tale of two cities, one thing is for sure: the time to invest in high-yield commercial property has never been clearer.
Richard Stacker is head of Charter Hall Direct Property.
