Asian firms upgrade to prime CBD sites
Although the Sydney office leasing market remains under pressure for floor plates of more than 1000 square metres, the new tenants are creating supply issue at the smaller end with their increasing space demands.
Owner-occupiers in the strata market are also looking, which has compounded the squeeze for space.
Asian-based investors are also buying assets, but these properties usually have long leases with larger corporations.
The director of leasing at Jones Lang LaSalle, Ben Kardachi, said the expansion moves had been driven by Chinese occupiers.
He said the trigger was the desire of these groups to expand their international network.
"Chinese businesses are upgrading to long-term leases in prime-grade buildings in the Sydney CBD office market as their businesses mature and expand here," Mr Kardachi said.
"The trend of moving to quality Grade A and Premium Grade buildings is very consistent with what we have seen by Chinese organisations in Beijing and Shanghai." He said recent deals included the Agricultural Bank of China, which expanded its Sydney presence through its relocation to 2 Chifley Square from MLC Centre, 19 Martin Place.
Other recent and upcoming moves by Chinese corporates into the Sydney CBD office market include Greenland Group at 233 Castlereagh Street; Sinopec and Wealth Resources at 126 Phillip Street.
"Greenland chose the property given its proximity to the large-scale residential development they are undertaking in the Sydney CBD - the old Sydney Water site," Mr Kardachi said.
State Grid Corporation also moved via a short-term sublease on 126 Phillip Street.
The senior executive of leasing at Jones Lang LaSalle, Christopher Selman, said leasing activity from mainland China would only increase in the Sydney CBD office market, with several inquiries already received.
Dr Dominic Brown, head of South East Asia and Australia/New Zealand research for DTZ, a UGL Company, said about 71,500sqm of new space was due on the Sydney leasing market next year, to be delivered across five separate projects.
"The largest source of new supply is from 5 Martin Place, which is currently undergoing significant construction work to increase overall floorspace to 33,000sqm," Dr Brown said. "Given the comparatively low level of gross new supply expected over the year, it is likely that net supply in 2014 will fall below the 10-year average of 36,000sqm."
Frequently Asked Questions about this Article…
Jones Lang LaSalle says Chinese occupiers are expanding their international networks and moving into long‑term leases in prime Grade A and Premium Grade buildings as their businesses mature and grow in Sydney.
Recent moves reported include the Agricultural Bank of China relocating to 2 Chifley Square (from MLC Centre, 19 Martin Place), Greenland Group at 233 Castlereagh Street, Sinopec and Wealth Resources at 126 Phillip Street, and State Grid Corporation taking a short‑term sublease on 126 Phillip Street.
The influx of tenants from China and other Asian cities is helping to ease some leasing pressure for landlords overall, but demand for smaller floor plates has increased and pressure remains for large floor plates over 1,000 square metres.
Yes. The trend is toward quality Grade A and Premium Grade buildings, with Chinese businesses upgrading to long‑term leases in prime‑grade properties similar to patterns seen in Beijing and Shanghai.
Owner‑occupiers in the strata market are also seeking space, which compounds the squeeze at the smaller end. Asian‑based investors are buying assets too, though those properties typically come with long leases to larger corporations.
According to Jones Lang LaSalle’s leasing executive Christopher Selman, leasing activity from mainland China is expected to increase, with several enquiries already received.
DTZ research head Dr Dominic Brown says about 71,500 square metres of new space is due to be delivered next year across five separate projects, with the largest source being 5 Martin Place increasing to about 33,000 square metres.
Dr Dominic Brown notes that given the comparatively low level of gross new supply expected over the year, it is likely net supply in 2014 will fall below the 10‑year average of 36,000 square metres.
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