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Forecast rent rises spur commercial market
Released 21 February 2011

The smaller end of the Sydney commercial market is attracting increased buyer interest ahead of forecast increases in city office rents, according to CB Richard Ellis.   

The CB Richard Ellis review highlights a series of recent sales in the sub $10 million market to buyers looking to either capitalise on – or insulate themselves from – pending rental hikes.

Tenants making the switch to be owner occupiers include Planit Software Testing which recently paid $4.7 million for a small freehold building at 152 Gloucester Street in The Rocks.

Investors are also scouting for opportunities to buy vacant or semi-vacant buildings, to capitalise on future rent increases and rising tenant demand.

Recent deals include the $3.1 million sale of a vacant building on the corner of Sussex Street and Erskine Street. The building was acquired by a private investor.

CB Richard Ellis agents Rohan Ramsay and Gavin Lloyd negotiated both sales. Mr Ramsay, an Associate Director of City Sales, said the transactions highlighted the owner occupier and investor demand for small freehold buildings in and around the CBD.
“Improving tenant demand is pushing vacancy down and, as a result, we forecast rents to grow by over 15% in 2011/2012,” Ramsay said.

In the case of 152 Gloucester Street, Mr Ramsay said the property had been surplus to Grocon’s needs following its development of the neighbouring Cove apartments.

“Planit bought the property as their new corporate headquarters as they did not want to face a market rent review later in 2011 and decided it was far more economical to purchase,” he added.

The Gloucester Street building has a net lettable area of 616 square metres, including a ground floor retail/showroom space and boutique office space.

Investors have also been scouting for opportunities, as evidenced by the recent sale of a mixed use building on the corner of Sussex and Erskine streets.