The Sydney office market Sydney accommodates Australia’ s biggest office market with the CBD having the biggest share, with 4,961,728 m2( m3property, 2015). Office space is categorised using the Property Council of Australia’ s( PCA) office matrix. Demand for Sydney office space is high, especially in the CBD. Following the Great Financial Crisis in 2008, the market grew slightly with vacancy diminishing from 10 % vacancy in 2011 to 9 % by 2015( CBRE, 2015). Demand for premium sustainable office buildings is high, with this Green Star rated stock commanding higher values and lower vacancy rates( Newell et al, 2011). Given the Sydney office market is performing well with decreasing vacancy, good yields, increasing absorption and values, the office market supply is also increasing.
The CBD supply pipeline was 460 000 m2 in 2014 which represents 9.27 % of current total stock. A proportion, approximately 250 000m2, is Barangaroo, the redevelopment of a container dock area immediately adjoining the CBD. It is very unusual to get such a large amount of stock coming to market in a relatively short space of time. It is due to come onto the CBD office market in 2016 and 2017. As such, the Barangaroo supply is predicted to cause movement of existing CBD tenants in Premium and A Grade stock into the new Barangaroo stock( CBRE, 2015). In turn, tenants in existing mid-grade CBD office properties are predicted to backfill the vacated premium stock; and a replacement market develops. The result will be increased vacancies in mid and lower grade stock( Investa, 2014. Savills, 2015) and a form of relative obsolescence is predicted.
The housing market Australia’ s 2015 housing market is very heated and some forecasting the‘ bubble will burst’. Overall prevailing conditions are low interest rates and low unemployment. In Melbourne, Sydney and Brisbane there has been high demand by foreign investors for apartments in the CBDs( EC Harris, 2014. CBRE, 2015). Many of whom are Chinese, seeking to invest money in markets, perceived as stable and safe. Many investment apartments purchased by Chinese buyers remain un-let as it is considered unlucky for Chinese people to occupy buildings, which have been already occupied. Having these properties un-let, further exacerbates housing affordability problems for many Australians. The superannuation system in Australia also encourages citizens to buy investment properties for a retirement income; and this too drives up prices and excludes first time buyers.
Recently residential supply in the CBDs has been very low and stock has been restricted to office use predominantly( JLL, 2015). However in the last decade, urban planners seek to reintroduce vitality and mixed use into CBDs, by allowing more residential land use. New unit with amenities such as gyms and pools, easy access to work, retail facilities and entertainment, are attractive to some buyers and investors. The migration of office tenants into newer stock and increasing vacancy rates in lower grade stock, combined with low interest rates, demand from foreign investors, wealthy immigrants, and increasing urbanisation; housing prices escalate and this creates the economic viability to convert older, vacant or partially vacant office stock into residential land use.
Location Numerous variables influence the conversion adaptation potential of buildings( Wilkinson et al, 2014, Remøy and van der Voordt, 2014). One is the prevailing property market, described above. The location of the property is significant in terms of accessibility and public transport, access to amenities such as food and other retailing and entertainment. Access to services such as healthcare, childcare and education is also important for residential stock( Wilkinson et al, 2015).
768 ZEMCH 2015 | International Conference | Bari- Lecce, Italy