‘Metro effect’ drives demand for premium neighbouring offices
Demand for premium office space near Metro stations is booming. Picture: NewsWire / Max Mason-Hubers
The ‘metro effect’ has sparked a shift in Sydney’s office market, prompting companies to flock to tightly held buildings close to new stations.
A report by real estate agency Savills has found that the amount of premium office space available now or within the next 12 months declined by 17.8 per cent over the year to August, with limited availability for the year ahead.
Conversely, the amount of A-grade space available rose by 9.4 per cent in that period, with offices in some areas now seen as less desirable. Out-of-favour precincts include areas around Hyde Park and Darling Harbour, where more space is becoming available.
At the top end, the battle for premium office space was largely driven by two factors, according to Chris Naughtin, Savills capital markets research national director.
“The availability of premium-grade contiguous floor space in Sydney’s CBD reflects the trend for tenants to upgrade workspace in a bid for talent and to enhance their ESG (environmental, social and governance) credentials,” Mr Naughtin said.
Commuters take the light rail at Circular Quay in the Sydney CBD. Picture: NCA NewsWire /Dylan Coker
The firm’s Full Floors Report shows the impact of Sydney’s new Metro stations and shifts in the CBD office market.
Findings include that companies were flocking to Martin Place and surrounding areas while vacating office space by Hyde Park, or Midtown, and Darling Harbour.
“The contrast between the core and other pockets of the CBD is widening however, as tenants leave Midtown and the Western Corridor in favour of core locations. The Sydney Metro is the wildcard though, and we are yet to see its full impact on the office market,” he said.
The Victoria Cross Metro station in North Sydney. Picture: NewsWire/Max Mason-Hubers
Sydney’s new Metro system has four new stations in the CBD: Barangaroo via Millers Street, Martin Place via Castlereagh Street, Town Hall via Pitt Street and Central Station via Elizabeth Street.
Sydney’s Walsh Bay and Southern CBD precincts also had increasing in demand over the past year, while availability in Midtown and the Western Corridor increased by 13 per cent and 10.2 per cent, respectively, compared to 2023.
There was also a noticeable difference in full-floor availability, except in the Midtown precinct, which had full-floor availability of about 18.1 per cent, and in the Western Corridor, which had about 16.7 per cent availability.
“The squeeze is on premium space in the Sydney CBD, with a distinct lack of full-floor space in the CBD core,” Mr Naughtin said.
