Parramatta Office report shows resilience in the face of national office market decline

20 February 2024

The office market nationwide faces ongoing challenges due to low uptake, leading to increased vacancies and downward pressure on rents and asset values in CBDs and non-CBDs alike according to Peter Vines, managing director of Ray White Commercial Western Sydney.

While supply dynamics and withdrawals are crucial indicators, the underlying lack of leasing demand remains a persistent issue.

The rise of remote and hybrid work arrangements has contributed significantly to declining occupied stock, as businesses reassess their accommodation needs amid rising operational costs. Many are downsizing or relocating to save on expenses, leading to a decline in net absorption levels across most office markets.

In Parramatta, the adoption of hybrid work models has dampened the CBD’s vibrancy, hindering its ability to attract new businesses and retain existing tenants. Efforts to enhance office amenities and revitalise the area have been slow. However, Parramatta’s stability in net absorption, ranking eighth among major Australian office markets, is a positive sign. This, coupled with stock withdrawals, has reduced total vacancy rates to 22.0%.

Population growth and infrastructure improvements position Parramatta for growth compared to other major NSW markets. Additionally, the region offers affordability relative to Sydney CBD and North Shore markets, with office assets of comparable quality and sustainability standards catering to various corporate needs.

Market uncertainty has subdued sales activity, with vendors hesitant to list properties and facing pressure to align with reduced capital values and higher yields sought by purchasers. Despite this, activity remains in the smaller end of the market, particularly in strata and freehold secondary assets, attracting opportunistic buyers seeking potential uplift through redevelopment or repositioning strategies.