September 12, 2023

Why Parramatta’s office tenants are ‘fleeing older stock’

By Carolyn Cummins
September 13, 2023 — 12.12am
, register or subscribe to save articles for later.

Save articles for later

Add articles to your saved list and come back to them any time.

The Parramatta office market is beginning to mirror the Sydney CBD, with demand strong for the higher-graded commercial assets.

This is putting pressure on the owners of the lesser quality buildings to upgrade or face permanent vacancy.

Dubbed the “flight to quality”, tenants are now taking advantage of premium-grade office leases that are becoming more prevalent with the construction of new towers, some of which were completed during the pandemic lockdown.

32 Smith Street, GPT Group’s latest Parramatta tower, has QBE as the major tenant.

With flexible working practices, more office space in the new towers is available and is being snapped by savvy tenants.

New JLL research shows that the vacancy rate in Parramatta for assets less than five years old is shrinking fast, falling to just 8.3 per cent in the second quarter of this year. This contrasts with a vacancy rate for secondary-grade office assets that is tipped to hit 50 per cent by the end of the year.

Having been sitting a near zero vacancy rate for many years, the new construction has led the overall Parramatta rate blow out to 23.5 per ent over the second quarter.

The prime grade vacancy rate marginally decreased for the second time since late 2021 by 0.7 points to 18.6 per cent in the same time frame.

Driving the trend are tenants migrating from B grade and secondary stock on the outskirts of Western Sydney into better-quality premises in central Parramatta, where prime gross effective rents fell by 0.5 per cent quarter-on-quarter to $348 per square metres.

At the same time, there were no office completions recorded in the first half of 2023 and one office withdrawal due to conversion to other use.


JLL is tracking 15,400 square metres of office stock under construction across two projects in Parramatta. The largest, 85 Macquarie Street at 10,000 square metres, is due for completion this year.

Ben Lalic, JLL’s senior director of office leasing in Parramatta, said existing tenants looking at the flight to quality “need to move now”.

“Lots of new development has come online in the past few years, but there’s no more space being added to market,” Lalic said.

“We’re seeing a limited time for occupiers to take advantage of the flight to quality; the window is 12 months. Prime grade space is non-existent, and occupiers will have to settle in the secondary grade market.”

There were two key office transactions during first half of 2023, totalling $67.6 million. They were 9 George Street, sold by the Brisbane Investment Corporation to a private investor for $49.6 million, and 144 Marsden Street, sold by a private investor to the Unity Church of Australia for $18 million

Vanessa Rader, head of research at Ray White said while the absorption of space for Sydney’s markets, such as the CBD and Parramatta, has not had the volume to move the vacancy rate downwards, “it is clear new tenants are fleeing older style stock for shiny Premium and A-grade offerings.”

“Supply of these assets in these markets too have played a role. Continued new supply of high-grade assets is not allowing these markets to reset after the COVID-19 disruption,” Rader said.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Carolyn Cummins is Commercial Property Editor for The Sydney Morning Herald.Connect via Twitter or email.


Leave a Comment

Your email address will not be published.