Office market analysis
The strength of Wollongong’s economy has led to business and jobs growth, particularly in the professional services space. The Property Council of Australia (PCA) Office Market Report (Jan 2019) found Wollongong’s office market vacancy rate to be at a record low of just 1.4 percent, reflecting demand for higher quality buildings. The rise of the professional services sector is also becoming a significant user of office space across Wollongong, given the higher staff retention rates, lower salaries and lower leasing costs compared with Sydney.
15 Cranes across Wollongong CBD are building over 30,000 sqm commercial space (including 16,500 sqm A-grade Office) and 900 residential units (Sept 2019)
Herron Todd White have provided an update on the Wollongong Office Market as at September 2019. Key findings are:
- While rents have remained relatively stable over the last five years, there are signs that future growth will occur given the low A-Grade vacancy rate and strong local economy.
- Sales transactions in the Wollongong office sector have slowed over the last 12 months mirroring the trend experienced by the broader commercial real estate market across regional NSW. This comes at the end of a very buoyant three years where record sales prices were achieved. Moving forward participants are expecting sales to increase in the second half of 2019 amid future interest rate cuts forecast.
- Commercial leasing conditions in the Illawarra region have improved over recent times with local agents reporting increased enquiry levels and reduced vacancy periods for well-placed tenancies in good quality, well maintained buildings and with good off-street parking availability. Incentives remain common with discounts between 10 percent and 15 percent of gross annual rent typically required to attract a new tenant, usually in the form of a rent-free period.
- The rejuvenation of the Wollongong CBD over the last three years has assisted in attracting office tenants to the region. Local agents are reporting a healthy level of enquiry for office space in quality, well placed buildings with MMJ securing several tenants for the recently refurbished 6-8 Regent Street and Knight Frank has secured Aon Corporation on a new lease in the Corporate Square building on Burelli Street.
A-grade office space opportunities in Wollongong
Wollongong is an attractive investment opportunity compared to Sydney. For those who are interested in investing in commercial real estate, our city offers higher yields and more opportunity to enter the market. Giving an indication of the appealing opportunities in Wollongong are the four large A-grade office developments, two of which are currently under construction, and potentially available by 2020.
This is also great news for businesses who will be moving their company to Wollongong. Over the next few years, you will have access to brand new high-quality office spaces – which quality will be on par with any other Australian major city.
A-grade office space market indicators
Recent benchmarking from Herron Todd White (2019) shows that rent in the Wollongong A-grade office space is affordable compared with other Sydney markets and for investors, the higher yields on offer are attractive.
$400m+ project pipeline, includes an additional 30,000+ sqm of A-grade office space