Private investment market have warehouse buildings at top of their Christmas list

The Savills Blog

Private investment market has warehouse buildings at top of their Christmas list

Santa Claus certainly has his work cut out for him this year, as the Sydney property market puts warehouse office buildings in and around the City Fringe on the top of its Wish List.

With the development of business sub-centres located beyond the confines of the CBD, and as a number of these inner city suburbs experience gentrification, it is clear that the City Fringe has had a swing towards younger generations being increasingly interested in more urban cosmopolitan lifestyles that come with a shared economy approach.

With the Christmas rush fast approaching, we have seen enquiry levels almost double for warehouse office buildings in comparison to 2018.

Certainly the nostalgia and scarcity of these older warehouse buildings are drawing in owner occupiers and investors as they provide creative workspace that the modern buildings cannot.

Darlinghurst, Woolloomooloo, Chippendale, Surry Hills, Redfern, Eveleigh, Newtown, Erskineville, Glebe, Ultimo and Pyrmont contain a cluster of creative industries which evolved organically since the 1980’s from former clothing manufacturing buildings now being readapted into state of the art creative office space.

Subsequently, management within these creative firms has identified that the firm’s location plays a major role for staff satisfaction.

The shift that manufacturing-related industries scattered throughout Sydney’s City Fringe experienced when manufacturing in Australia was no longer competitive in comparison to outsourcing to Asia, meant that these beautiful warehouse buildings were readapted into office space over the course of the next 40 years.

Some of the key drivers in today’s market can be traced to the expansion of creative and design-based services as part of the reconstruction of inner city heritage districts as well as an emergence of hybrid creative firms with advanced technology start-up companies, looking for a space with a difference.

The demand for innovative, flexible and creative commercial office space near the CBD has driven overall city fringe vacancy down to 2.8%, well below the 4.1% vacancy rate in the CBD.

With no projected supply under construction in the City Fringe market and future supply near non-existent until the central redevelopment, the market has major supply constraints which are driving demand and capital growth within the area.

Below are examples of recent sales in the area: 

Address

Price

Yield

Building Rate

1-9 Buckingham Street, Surry Hills

$33,411,000

4.40%

$19,700/sq m

18 City Road, Chippendale

$4,800,000

2.00%

$10,660/sq m

4-8 Australia Street, Camperdown

$12,000,000

3.90%

$6,660/sq m

109 Riley Street, Darlinghurst

$5,505,000

Vacant

$9,524/sq m

10-12 Egan Street, Newtown

Confidential

Vacant

$9562/sq m



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