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Peggy Sito

New business district emerging as good infrastructure and demand increase

Pyrmont peninsula, directly west of Sydney's central business district (CBD), is emerging as a new commercial hub, with demand for office space expected to surge in the wake of improved infrastructure development.

Property consultants said the increased presence of enthusiastic developers would boost the growth of the new business district.

Pyrmont peninsula, which includes Pyrmont and Ultimo, contains about 280,000 square metres of commercial office space, according to Australia-based Laing+Simmons Commercial.

A number  of significant office projects were expected to  get under way in the next few years, the property consultant said.

Property groups Chartered Hall,  Mirvac, St Hilliers and  Babcock & Brown each have two or more developments  planned for the area, indicating  robust demand for office space on the fringes of the Sydney CBD.

'More than 60,000 square metres of new and refurbished office space will come on the market in the next three to five years,' said Michael Majauskas, research analyst at Laing+Simmons.

Pyrmont,  long targeted for residential development, has been the subject of a spate of commercial plans recently, and tenant take-up has been strong.

According to Colliers International , the Pyrmont area has a vacancy rate of about 5.3 per cent for the 102,000 square metres of A-grade office space. Total vacancy in Pyrmont is 6 per cent, marginally above the market balance.

'Pyrmont peninsula is predicted to benefit from the completion of the cross-city tunnel project as well as increased tenant demand for office accommodation close to the CBD,'  Mr Majauskas said.

The tunnel is one of the city's three  big ongoing infrastructure projects.  The other two are the Chatswood to Epping Railway and the Western Sydney Orbital-M7 Motorway. Building costs for all three projects are estimated at more than A$3 billion (HK$15.5 billion).

Sydney's cross-city tunnel project is scheduled for completion in late 2005. The tunnel will be owned and operated by the Cross City Motorway Consortium,  led by Cheung Kong Infrastructure Holdings. Tunnelling started in May this year,  and excavation work so far covers 520 metres.

Market rents in Pyrmont  average about $300 per square metre gross. Net effective face rents are $320 to $385 per square metre.

'The figure is expected to increase substantially in the next few years,'  Mr Majauskas said.

Net effective office rents  at premium office buildings in the Sydney CBD are $660 per square metres. Grade-A office rents in the CBD are $470 per square metre, while achievable grade-B office rents are $300 per square metres, according to Laing+Simmons.

Office rentals in the core CBD remained stable in the second quarter, while demand for office space in Sydney's CBD  picked up slightly, with most leases coming in the form of renewals and lease extensions,  consultants Chesterton Petty said.

Overall vacancy  has remained largely unchanged since January. In the CBD, the vacancy rate was 8.4 per cent,  and reached 12.7 per cent in North Shore.

Property consultants predict  growth in  leasing activities and rentals  in Sydney's office market in the medium term.

Although low tenant demand, the world economic downturn and drought had dulled hopes for growth  in the office sector, the market was expected  to pick up early next year, with momentum building up  through 2005 and 2006, Laing+Simmons said.



Pyrmont set to become Sydney's second CBD