Chatswood is a veritable melting pot of cultures from England to Asia and Australia, and a popular destination for people to work, shop and play.
With a wide variety of restaurants and cafés, Chatswood is known as a major dining destination in the Lower North Shore of Sydney.
Commercially, Chatswood recorded -2,200sq m of net absorption over Q2/19 on the back of small tenant (< 1,000sq m) contractionary leasing activity. Headline vacancy rose 0.7 percentage points (pps) to 5.6% as a result. Secondary vacancy also rose over 2Q19, reaching 8.2%, although it remains inside the 10-year average of 10.7%. Despite this uptick in vacancy over the quarter, underlying demand for office space in the market remains strong, with 12,100sq m of net absorption recorded over the 12 months to 2Q19.
Chatswood’s proximity to retail amenity – Chatswood Westfield and Chatswood Chase – alongside the market’s strong accessibility offering, continues to support leasing take-up. The Sydney Metro, with lines from Rouse Hill to Chatswood and Chatswood to the CBD, will continue to support demand for office space within the Chatswood office market moving forward.
According to David Hickey, Associate Director, Metropolitan & Regional Sales at Savills Australia, the supply pipeline is limited in Chatswood.
“There is only one project that currently holds development approval – Cromwell Property Group’s planned development at 485 Victoria Avenue. The development is expected to add 3,291sq m of office stock to the Chatswood market, and is not projected to finish prior to 2021.
“Stock levels will stay relatively stable within the Chatswood office market as a result, and ongoing leasing activity over the short-to-medium term is expected to place further downward pressure on vacancy moving forward.”
According to Savills Australia research, secondary gross effective rents increased by 1.3% over 2Q19 to AUD 409 per square metre per annum, reflecting growth of 9.7% year-on-year.
This was primarily driven by a 0.6 pps fall in the secondary incentive to 23.5%, and was supported by secondary gross face rents growing by 0.6% over 2Q19 to AUD 534 per sqm pa (7.8% for the 12 months to 2Q19) on the back of below trend secondary vacancy.
The Chatswood office market is currently 28% cheaper when compared to North Sydney (secondary gross effective basis) and offers cost sensitive organisations a relatively cheaper alternative.
Mr Hickey said office assets in Chatswood have historically been tightly held, with only four assets being sold in the past 12 months – totaling AUD 776.9 million. The most recent transaction was Starwood Capital and Arrow Capital’s joint acquisition of The Zenith, 821-841 Pacific Highway, from Centuria and BlackRock for AUD 438.2 million in 2Q19.
“Despite being a prime asset, the acquisition of The Zenith highlights the value of retail amenity and public transport connectivity for investors assessing the Chatswood office market. Chatswood secondary yields, like those of the other North Shore office markets, have been in a downward trajectory since Q413. The secondary yield range in Chatswood currently sits at 5.50% - 6.00% and offers relative value in comparison to North Sydney’s secondary yield range at 5.25% - 5.50%.
Serviced by all forms of major transportation, Chatswood is at the centre of some of NSW’s major interchanges. The development of transport infrastructure is vastly improving access throughout metropolitan Sydney, with high quality amenity a priority in Chatswood, as a result of the unprecedented level of residential development.
To add to this, Nick Lower, Director, Metropolitan & Regional Sales at Savills Australia, said there is limited new commercial supply and when assets hit the market, they are snapped up rather quickly.
“Located in one of Sydney’s most popular inner city suburbs and home to major infrastructure, residential, retail and commercial projects, Chatswood also boasts one of the State highest suburban median house prices ($2,180,000). Situated on the cusp of the industrial precinct within Chatswood, the area has undergone significant gentrification over recent years and has seen major tenants call home,” he said.
One rare property set to hit the market later this month is 79 Victoria Avenue. The property comprises of a five (5) storey commercial building including two (2) levels of at grade basement car parking. Offering 2,165sq m of building area, on a 1,062sq m site, the property is being offered with vacant possession with one tenant currently on a month to month lease agreement.
The property is designed to offer a variety of uses including office accommodation, showroom and warehousing facilities, indoor recreations plus an number of other alternatives STCA and is for sale exclusively through Nick Lower, David Hickey, Nick Tuxworth and Jordan Lee of Savills Australia, with price expectations of circa $13-14 million.
The property boasts a generous parking ratio, spacious and efficient floor plates with the ability to access an abundance of natural light and there is enormous benefit of subdividing the floor plates and selling as individual strata offices, which will ultimately offer additional exit strategies for any incoming purchaser.
According to Mr Lower, “This is currently the only mixed use building in the area on market and has been owned for over 10 years by a private high net worth family who are involved in product and material distribution.
“The property offers significantly large floor plates allowing for incoming purchasers to reposition the building for larger scale tenants, or potentially create personalised space for groups like childcare and healthcare operators” he said.
Having the flexibility for multiple uses, the property offers buyers a “blank canvas” for future repositioning, whilst having strong income available and the ability to lease immediately for buyers looking for a more passive opportunity. There is also DA approval for elevator installation.
Mr Hickey said the property presents a compelling opportunity to acquire a secure, well located city fringe asset, all whilst having numerous alternative uses for the building’s next life cycle.
“This rare offering provides the opportunity to acquire a 100% freehold interest in one of the most prominent positions in the tightly held suburb of Chatswood.
79 Victoria Avenue is located on the fringe of Chatswood's industrial precinct, in close proximity to the Chatswood Central Business District and strategically positioned between both Eastern Valley Way and Penshurt Road, allowing for direct access to the Sydney CBD, North Shore and Northern Beaches.
Considered the North Shore's major commercial and retail precinct, 79 Victoria Avenue is surrounded by many of Chatswood’s major retailers, with retail outlets situated along both Victoria Avenue and Pacific Highway along with numerous office buildings and major residential developments, all nestled amongst some of Sydney’s finest residences.
Mr Hickey said there excellent transport facilities are available within the immediate vicinity, with Chatswood Rail and Bus Interchange located to the West on Railway Street.
“The Chatswood Transport Interchange has recently undergone a significant upgrade which included a major reconfiguration of the Chatswood train station with new platforms, concourse, lifts and escalators, a new bus interchange, taxi ranks, improved pedestrian access and connections to adjoining properties and public spaces.
“Chatswood is easily accessed by road, being within 10 kilometres of the Sydney CBD and sitting adjacent to the Pacific Highway. In addition, the area’s proximity to other North shore business and industrial centres, such as Lane Cove, North Ryde, Artarmon and North Sydney, make it an attractive corporate location for any prospective purchaser,” he said.
Learn more about the Savills Metropolitan & Regional Sales team.