_Smoke clears as North Sydney continues to rise
Now universally considered as an extension of the CBD, you’d be forgiven for thinking North Sydney is Sydney’s newest city. Centrally located and surrounded by A-grade and premium grade buildings, long gone are the days of thinking North Sydney is just the smiling face from the other side of the city. It has come into its own with a defined vision and platform.
Its transformation over the recent years is what has really seen the precinct kick into gear, and the North Sydney Council has now taken a unique step with North Sydney set to become Australia’s first smoke-free CBD. It is decisions such as these that demonstrate how the innovative thinking of the Council continues to drive North Sydney forward.
The council has done an amazing job at building and improving local infrastructure, amenity and activating the community. They are committed to public domain upgrades, including overhauls of North Sydney Oval and the iconic North Sydney Olympic Pool, while also working to improve connectivity through the Western Harbour and Beaches Tunnel.
Business is booming. The gross regional product invested into North Sydney now exceeds AU$16 billion - this investment and economic development strategy has helped establish North Sydney as one of NSW’s most economically important areas.
International buyers have taken note, and now see North Sydney as a premium investment choice. Foreign investment accounted for AU$1 billion or 80% of all transactions in the 12 months to July 2018, with Hong Kong pouring AU$523.55 million into the North Sydney market. The Chinese buyers in particular are scouring North Sydney for investments that have harbour views or development potential and are elbowing each other to secure these assets at premium prices.
50% of Northpoint Tower (100 Miller Street) sold by Knight Frank to Early Light Holdings for AU $300 million
Overall, North Sydney continues to see strong demand from investors, recording AU$1.26 billion ($10 million+) of transactions in the 12 months to July 2018. Our recent sale of 50% stake of Northpoint Tower (100 Miller Street) for AU$300 million, on behalf of Redefine Global, to Early Light Holdings is a clear indicator. The transaction marks Sydney’s largest metropolitan transaction of 2018, and at a core market yield of 4.73%, the first investment sale to record a sub-5% yield. It is deals like these that highlight the strength of the market and confidence investors have in North Sydney as a safe investment option outside the Sydney CBD.
With no new supply additions this year, the North Sydney market awaits the completion of two major developments currently under construction – 100 Mount Street and 1 Denison Street, bringing approximately 100,000 sqm of brand new product to the market. More recently, 118 Mount Street, owned by Zurich Insurance, has commenced ground works for its new head office. Over the next 24 months as these developments reach completion and residential conversions slow there will be a healthy supply of new stock to the market, which is set to ease vacancy pressure.
It’s little wonder these tenants are rushing to secure space. They’re living it large, securing contiguous floor space in premium grade buildings with harbour views, access to instant transport and a refreshed approach to local amenity and entertainment for their employees. This is having a direct impact on B-grade rents, which are now chasing yesterday’s A-grade levels, whilst A-grade rents are chasing Sydney CBD levels. The withdrawal story continues and multigenerational tenants are not willing to compromise by considering other locations. All of which is continuing to drive growth. It is this rental appeal that saw the vacancy rate of North Sydney decrease to just 2.1% in the six months to July 2018.
Recently listed, 72 Christie Street is positioned in the heart of the St Leonards transformation
It’s becoming a place to not only work, but to live and play, with the Council nominating areas to the Northern end of the CBD, such as the Ward Street Precinct, for a new mix of commercial, mixed-use and residential developments.
The new dawn is here for North Sydney – it continues to thrive and grow offering an abundance of opportunities for investors and tenants alike, cementing itself further as an extension of Sydney CBD.
If you have questions on the market, please get in touch with us today.
All research and statistics sourced from Knight Frank’s latest North Sydney Office Market Overview.
Available for download here