Sydney CBD Office State of the Market Q2 2024

Investment Rating - The report indicates a stable investment rating for the Sydney CBD office market, with prime yields unchanged for the first time since Q1 2022, holding firm at 6.0% in the core CBD precinct [1]. Core Insights - Prime net face rents increased by 2.1% in Q2 2024, with the Midtown precinct leading growth at 3.6%. Effective rents saw a slight increase of 0.3% due to rising incentives from 35% to 36% [1]. - Tenant demand is primarily driven by professional and financial services, which accounted for 67% of leasing activity, with core precincts representing 76% of lease volumes in H1 2024 [1]. - New supply in 2024 is projected to reach 188,771 sqm, with over-station developments making up the majority at 154,705 sqm, of which 80% is pre-committed [1]. Market Data Summary - Core Market Data: - Net face rent in the core precinct is $1,477/sqm, with a quarterly change of 2.5% and an annual change of 5.0%. The net effective rent stands at $888/sqm, with a 34% incentive and a vacancy rate of 10.5% [6]. - Leasing Activity: - Significant leasing deals include Link Market Services at $1,550/sqm in Midtown and Grant Thornton at $1,800/sqm in the Core precinct [9]. - Recent Sales: - Notable sales include 55 Pitt Street at $1,300 million with a yield yet to be determined and 5 Martin Place at $296.2 million with a yield of 6.0-6.25% [10]. - Major Developments: - Key projects under construction include Parkline Place in Midtown (47,565 sqm) and Metro Martin Place North Tower in the Core (75,000 sqm), both expected to complete in H2 2024 [11].