1. travel
2. tourist destinations
3. australia and new zealand

Savills Research
New South Wales
Spotlight
Parramatta Office
April 2015
Highlights
 The latest PCA numbers show vacancy decreased
 Negative net absorption of 7,236 square metres was

 Indicative A Grade yields currently range from 6.75%

slightly to 6.3% in the six months to December 2014
Savills has recorded approximately $703 million
worth of office transactions in the 12 months to
March 2015
Approximately 29,853 square metres of office
accommodation was leased in Parramatta in the 12
months to March 2015
recorded in the 12 months to December 2014

to 7.50% as at March 2015
Average A Grade net face rents in Parramatta are
currently $405 per square metre per annum, up 6%
over the last 12 months
Savills Research | Parramatta Office
April 2015
Savills New South Wales Team
Research
Managing Director
Divisional Director
Simon Hemphill
+61 (0) 2 8215 8892
[email protected]
Managing Director
Simon Fenn
+61 (0) 2 8215 8830
[email protected]
Office Leasing
Divisional Director
Simon van Grootel
+61 (0) 2 8215 8826
[email protected]
Valuation & Consultancy
Divisional Director
Russell Nicolson
+61 (0) 2 8215 8987
[email protected]
Corporate Real Estate
Divisional Director
John Mackenzie
+61 (0) 2 8215 8982
[email protected]
Associate Director
Nick Lau
+61 (0) 2 8215 8818
[email protected]
Investment Sales
Divisional Director
Michael Brislane
+61 (0) 2 8215 8924
[email protected]
Project Management
General Manager
David Nicholas
+61 (0) 2 8913 4813
[email protected]
Savills New South Wales
Level 7, 50 Bridge Street
Sydney, NSW 2000 Australia
+61 (0) 2 8215 8888
savills.com.au
savills.com.au/research
2
Savills Research | Parramatta Office
April 2015
Introduction
Parramatta is located in Greater Western Sydney 23 kilometres west of the Sydney CBD on
the banks of the Parramatta River. Parramatta is the administrative seat of the Local
Government Area (LGA) of the City of Parramatta. Parramatta CBD is the fifth largest
suburban office centre in Australia with 680,317 square metres of stock as at December
2014. In quality terms, approximately 40 percent of office stock is A Grade, with B, C and D
Grade space comprising approximately 60 percent of the market.
Since 2000, Parramatta has seen the consolidation of its role as a Government centre, with
the relocation of agencies such as the New South Wales Police Headquarters and the
Sydney Water Corporation from Sydney CBD. At the same time, major construction work
occurred around the railway station with the expansion of Westfield Shoppingtown and the
creation of a new transport interchange.
Parramatta is preparing to transform once again with the long awaited Parramatta Square
redevelopment, formally known as Civic Place. The proposed $2 billion development will
convert a three hectare inner city block of Council-owned and private properties into a new
stylish suburban city. The first stages of Parramatta City Council’s landmark development is
a step closer to being realised after the City’s Councillors voted to initiate the first
development site at 169 Macquarie Street by appointing Leighton Properties as the
developer.
Office Development
Savills, incorporating the latest Property Council of Australia (PCA) numbers, is currently
tracking approximately 140,000 square metres of new and refurbished stock in the supply
pipeline in Parramatta, most of which is awaiting precommitment prior to commencing
construction. As such, much of this future supply is considered long-term planning, with
earliest completion expected to be in the fourth quarter of 2016.
Parramatta Council owns a number of development sites in the Parramatta CBD, totalling
approximately eight hectares of land. One of which, stage one of the Parramatta Square
project, has commenced with the redevelopment of 169 Macquarie Street, known as One
Parramatta Square or 1PSQ.
Located at the eastern boundary of the site, north of the existing Sydney Water building.
Once complete the building will offer over 24,200 square metres of net lettable area across
14 commercial floors, plus ground level retail space. The University of Western Sydney
recently committed to the site and they plan to build a new student campus facility that will
be home to an estimated 10,000 students. Construction work is expected to begin in early
2015 and be completed for the first university semester in 2017.
Current Parramatta Office Development Activity
Property
Precinct
Status
460 Church Street
NLA (sq m) Type
1,003
Refurbishment
City North
Site Works
Completion
2015
1-3 Fitzwilliam Street
9,785
Refurbishment
City South
DA Applied
2015
20-22 Macquarie Street
1,518
Refurbishment
City West
Construction
2015
169 Macquarie Street
24,500
New
Mid City
Construction
2016
153 Macquarie Street
25,000
New
Mid City
DA Applied
2017+
83 George Street
10,000
New
Mid City
DA Approved
Mooted
87-89 George Street
11,517
New
Mid City
DA Approved
Mooted
105 Phillip Street
20,388
New
Mid City
DA Approved
Mooted
159-175 Church Street
35,000
New
City South
DA Approved
Mooted
Major Tenant(s)
UWS
Source: PCA / Savills Research
savills.com.au/research
3
Savills Research | Parramatta Office
April 2015
Leasing Activity
In the 12 months to March 2015, Savills identified 29,853 square metres of leases in the
Parramatta market. This is nearly double on the 12 months prior, and up on the five year
average (24,085 square metres).
Select Parramatta Office Leases to March 2015
Date
Property
May-14
426 Church St, Parramatta
815
305 N
Community Connections
May-14
110 George St, Parramatta
528
335 N
Government Property NSW
Jun-14
2-10 Wentworth St, Parramatta
960
498 G
NSW Government
Aug-14
169 Macquarie St, Parramatta
24,500
na
University of Western Sydney
Sep-14
91 Phillip St, Parramatta
940
na
KPMG
Oct-14
2-10 Wentworth St, Parramatta
610
488 G
Source: Savills Research
NLA (sq m)
Rent ($/sq m) Tenant
United Church in Australia Property
na = not currently available *Sublease **Renewal ***Prelease
Negative net absorption of
7,236 square metres was
recorded in the Parramatta
market in the 12 months to
December 2014.
A removal of approximately
5,561 square metres of
occupied stock was recorded
over the same period, coupled
with an increase of 1,675
square metres of vacant space.
A Grade recorded negative
absorption of 866 square
metres due to increased
available space according to
the latest PCA Office Market
Report.
However, the development of
169 Macquarie Street (fully
committed to UWS) should see
the Parramatta office market
recorded positive absorption in
the last quarter of 2016.
Sydney Office
Parramatta Net Absorption (sq m)
Dec-04 to Dec-14
60,000
50,000
40,000
30,000
20,000
10,000
0
-10,000
-20,000
Total Absorption (sq m)
Source: PCA / Savills Research
Linear (Total Absorption (sq m))
Net face rents in Parramatta as at March 2015 typically range between
$360 and $450 per square metre per annum for A Grade buildings, and
between $275 and $350 per square metre per annum for secondary
grade buildings. The average A Grade face rent in Parramatta $405 per
square metre per annum, a 6 percent increase over the last 12 months.
savills.com.au/research
4
Savills Research | Parramatta Office
April 2015
Undisclosed
Sydney Office
0%
IT &
Total Reported Leased in Parramatta (%)
Communication
12 months to Mar-15
0%
Recreational
Services
Finance
and
0%
Insurance
Mining & Utilities &
0%
Industry
W'Sale,
0% Retail
0%
Govt & Community
95%
Property &
Business Services
5%
Source: Savills Research
Source: Savills Research
Of the 38,453 square metres leased in the Parramatta office market in the last 12 months,
'Government & Community' was the dominant sector, accounting for 95 percent of the
stock, or 28,303 square metres. Similarly, the largest number of transactions was through
the 'Govt & Community' sector (4 transactions). It is worth noting that the majority of the
‘Govt & Community’ leasing activity was due the 26,000 square metre precommitment of
UWS to 169 Macquarie Street.
Vacancy
According to the latest PCA figures, the current composition of the market is as follows:
Parramatta Vacancy Rates – December 2014
Grade
Stock (sq m)
Vacancy (sq m)
Vac % Dec-14
Vac % Dec-13
A Grade
273,617
2,316
0.8
0.5
B Grade
211,023
18,418
8.7
6.5
C Grade
104,972
19,726
18.8
18.8
D Grade
90,705
2,466
2.7
6.6
Total
680,317
42,926
6.3
6.0
Source: PCA / Savills Research
The latest PCA Office Market Report shows that the overall vacancy rate in Parramatta
increased by 0.3 percentage points over the 12 months to December 2014 and currently
sits at 6.3 percent. Parramatta vacancy has experienced a downward trend since June
2010, where vacancy reached a cyclical high of 10.8 percent.
Over the last 12 months, A Grade vacancy in Parramatta rose marginally by 0.3 percentage
points to a low 0.8 percent (2,316 square metres). This reflects an increase of approximately
866 square metres of available space over the period. B Grade vacancy in Parramatta
recorded an increase from 6.5 percent to 8.7 percent over the last 12 months.
With no new office supply expected in Parramatta until the fourth quarter of 2016, coupled
with limited A Grade offerings in the market, strong demand in the precommitment market
is expected, as well as a tangible benefit to the secondary market in the short-term.
With strong rental growth and practically zero A Grade vacancy, the Parramatta office
market is one of the best performing markets in Sydney, and arguably the best performing
suburban market in Australia.
savills.com.au/research
5
Savills Research | Parramatta Office
April 2015
Sydney Office
Parramatta Vacancy by Grade (%)
Dec-04 to Dec-14
16%
14%
12%
10%
8%
6%
4%
2%
0%
Prime Vacancy
Secondary Vacancy
Total Vacancy
Source: PCA / Savills Research
Sales Activity
Savills have recorded approximately $703 million worth of office transactions in the 12
months to March 2015 in the Parramatta CBD, a record amount for the market. This is up
from $245 million in the previous year, and up on the five year average of $270 million.
The increase in investment activity over the past two years has been largely due to the
transaction of many of Parramatta’s prime buildings, as vendors seek to take advantage
of sharpening yields and improved investment demand from local and foreign investors.
Sydney Office
Parramatta Office Sales ($m and number)
(>$5m) Mar-05 to Mar-15
$800
16
$700
14
$600
12
$500
10
$400
8
$300
6
$200
4
$100
2
$0
0
Sales > $5m (LHS)
Sales No (RHS)
Source: Savills Research
In December, the NSW Government sold the Justice Precinct Offices at 160 Marsden
Street and the former Blood Bank building at 4 George Street for approximately $170.1
million to Eureka Funds Management. The buildings were offered with 12 year leases to
Government tenants.
savills.com.au/research
6
Savills Research | Parramatta Office
April 2015
Select Parramatta Office Sales to March 2015
Price ($m)
NLA
(sq m)
Price
$/sq m
Yield (%)
1 Charles St, Parramatta
241.12
32,735
7,366
7.52
Aug-14
1-3 Fitzwilliam St, Parramatta
29.00
9,782
2,965
VP
Oct-14
110 George St, Parramatta
83.00
20,970
3,958
8.50
Oct-14
153 Macquarie St, Parramatta
19.50
659
29,590
VP
Nov-14
2-10 Wentworth St, Parramatta
45.05
10,941
4,118
8.00
Dec-14
160 Marsden St & 4 George St,
Parramatta
170.10
21,587
7,880
na
Dec-14
90 Phillip St, Parramatta
16.75
2,944
5,690
na
Dec-14
169 Macquarie St, Parramatta
16.25
dev
3,249
Dev
Jan-15
87 Marsden St, Parramatta
33.15
6,659
4,978
8.00%
Feb-15
12-14 Wentworth St, Parramatta
5.30
1,226
4,323
VP
Date
Property
Jun-14
Source: Savills Research * na= not yet available VP= Vacant Possession
Following the sale of The Octagon at 110 George Street, Charter Hall Group announced the
acquisition of 169 Macquarie Street, a development site which forms part of Stage 1 of the
Parramatta Square Master Plan, for a purchase price of $16.25 million. The development
will have an end value of $220.50 million which has been fully pre leased to the University of
Western Sydney (UWS) for 15 years plus options. This transaction is a showcase of the
growing institutional demand for new office buildings in Parramatta.
Market yields in Parramatta as at March 2015 typically range from 6.75% to 7.50% for A
Grade buildings. Average A Grade yields are currently 7.13%, a 75 basis point firming over
the last 12 months. Savills expects market yields in Parramatta may further tighten as A
Grade buildings with strong lease covenants transact in the next 12 months.
Key Market Indicators – March 2015
A Grade
B Grade
Low
High
Low
High
Rental – Gross Face ($/sq m)
450
555
365
460
Rental – Net Face ($/sq m)
360
450
275
350
Rental – Net Effective ($/sq m)
306
360
227
263
Outgoings – Operating ($/sq m)
65
70
65
75
Outgoings – Statutory ($/sq m)
25
35
25
35
Outgoings – Total ($/sq m)
90
105
90
110
Typical Lease Term (years)
5
10
3
7
Yield – Market (% Net Face Rental)
6.75
7.50
8.00
9.50
IRR (%)
8.50
9.00
9.00
10.00
Cars Permanent Reserved ($/pcm)
250
275
200
250
Cars Permanent ($/pcm)
200
250
200
250
4,800
6,667
2,895
4,375
Office Component Capital Values ($/sq m)
Source: Savills Research
Rental rates reflect single, whole floor, net effective and mid-rise rental rates unless
specifically otherwise stated. Discounts and premiums exist for low and high rise space and
for significant occupiers.
savills.com.au/research
7
Savills Research | Parramatta Office
April 2015
Outlook
The Parramatta CBD has seen a surge of inner-city residential and commercial
development in recent years. This should see strong population growth for the region and
an increase of much needed A Grade supply. With the current development pipeline, the
Parramatta landscape is expected to go through a significant transformation in the next 510 years. Savills expects the broader commercial property sector in Parramatta should
continue to outperform, with strong rental growth and practically zero A Grade vacancy.
The Parramatta office market is expected to remain one of the best performing office
markets in Sydney.
Over next 12 months, Savills anticipates suburban office investment activity to continue to
remain strong, with Parramatta expected to maintain its recent momentum as acquisitive
buyers are attracted to the market. Demand from these buyers remains strong for assets
with a WALE of over 10 years to Government tenants.
Savills expect further transactions in the Parramatta market over the short-term with a
mandate from the NSW Government to divest of buildings in Parramatta to raise funds for a
number of infrastructure projects.
The next 12 months may see Private Investors and Syndicates finding it difficult to compete
with the larger local funds and Foreign Investors for well positioned assets as tightening
yields may price many out of the market.
Parramatta average A Grade face rents grew by 6 percent in the last 12 months. Savills
anticipate rents will continue to grow over the short to medium-term, driven by a distinct
lack of supply and low vacancy.
Parramatta has the ability to become a key centre for office development given the
availability of land and continued tenant interest; however, generating tenant demand
outside of Government departments remains the key to income growth in the Parramatta
office market.
savills.com.au/research
8
Savills Research | Parramatta Office
April 2015
Savills New South Wales Team
Our highly regarded research
divisions are dedicated to
understanding and giving indepth insight into the
commercial, industrial & retail
markets throughout Australia.
We also provide in-depth
consultancy services, ranging
from tenant representation to
property site selection for
multinational businesses.
Our research teams are
highly qualified real estate
professionals with
comprehensive knowledge of
property markets across
Australia.
The Savills Research &
Consultancy team has years
of experience, and supported
by our extensive agency,
property management and
valuation professionals, are
highly regarded and
respected along with Savills
Research teams across the
globe.
For our latest reports, contact one of the
team or visit savills.com.au/research
National Head of Research
Tony Crabb
+61 (0) 3 8686 8012
[email protected]
Savills provide free research
reports on all major property
markets, and some example
papers include:
 Office Markets
 Retail Markets
 Residential Trends
 Industrial Markets
 International Markets
Download the
Savills iPad App
for insights at
your fingertips
This information is general information only and is subject to change without notice. No representations or warranties of any nature whatsoever
are given, intended or implied. Savills will not be liable for any omissions or errors. Savills will not be liable, including for negligence, for any direct,
indirect, special, incidental or consequential losses or damages arising out of our in any way connected with use of any of this information. This
information does not form part of or constitute an offer or contract. You should rely on your own enquiries about the accuracy of any information
or materials. All images are only for illustrative purposes. This information must not be copied, reproduced or distributed without the prior written
consent of Savills.
savills.com.au/research
9
With a rich heritage and a reputation for excellence that dates
back to 1855, Savills is a leading global real estate provider
listed on the London Stock Exchange.
Savills advises corporate, institutional
and private clients, seeking to acquire,
lease, develop or realise the value of
prime residential and commercial
property across the world’s key
markets.
Savills is a company that leads rather
than follows with over 600 offices and
associates throughout the UK, Europe,
Americas, Asia Pacific, Africa and the
Middle East. With over 27,000 staff, we
seek out people who possess that rare
mix of entrepreneurial flair and rock
solid integrity, and are focused on
delivering clients with advice and
expertise of the highest calibre.
A powerful combination of global
connections and deep local knowledge
provides Savills with an almost
unparalleled ability to connect people
and property.
Savills extensive Asia Pacific network
spans 50 offices throughout Australia,
New Zealand, China, Hong Kong, India,
Indonesia, Japan, Korea, Macao,
Malaysia, Myanmar, Philippines,
Singapore, Taiwan, Thailand and
Vietnam.
Adelaide
Brisbane
Canberra
Gold Coast
Melbourne
Notting Hill
Parramatta
Perth
Sunshine Coast
Sydney
+61 (0) 8 8237 5000
+61 (0) 7 3221 8355
+61 (0) 2 6221 8200
+61 (0) 7 5509 1700
+61 (0) 3 8686 8000
+61 (0) 3 9554 5100
+61 (0) 2 9761 1333
+61 (0) 8 9488 4111
+61 (0) 7 5313 7500
+61 (0) 2 8215 8888
In Australia, we offer the full spectrum
of services from providing strategic
advice to managing assets and projects
and transacting deals. With a firmly
embedded corporate culture that
values initiative, innovation and
integrity, clients receive outstanding
service and can be assured of the
utmost professionalism.
Contact Savills for advice on
all aspects of property:
 Sales
 Leasing
 Valuations
 Asset Management
 Project Management
 Strategic Corporate Real Estate
 Property Accounting
 Facilities Management
 Residential Luxury Sales
 Residential Projects
 Research