North Shore commercial property market sees limited sales as buyers and sellers struggle to align
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The North Shore commercial property market has experienced a significant slowdown in sales, with a growing gap between buyers’ and sellers’ expectations, according to the latest market update from Hartigan Bolt.
Higher interest rates and a challenging leasing market have led to most owners being reluctant to sell into a declining market. Many of those who have run sales campaigns have subsequently pulled back as buyers have been below even reduced expectations.
The volume of major office sales across the North Shore has barely exceeded $250 million in 2023, compared with almost $2 billion in 2022 and more than $1 billion in 2021.
Notable sales include 54 Miller Street, North Sydney, an almost 7,000sqm office building that sold for $70 million, and 71 Longueville Road, Lane Cove, a 4,000sqm multi-leased office building that sold for $33 million.
While the office market has struggled, Sydney’s residential market has been far more resilient, helping to underpin commercial values in areas such as Crows Nest and St Leonards where there is potential for residential development.
In the leasing market, tenants continue to favour fitted out space in better quality buildings and more central locations, driven by high lease incentives. However, a lack of companies expanding has meant that vacancy rates remain high across all North Shore markets.
Despite the challenging conditions, Hartigan Bolt has leased over 17,500sqm across the North Shore in 2023, with 78% of the space leased having some form of fit-out and 68% having incentives of 30% or higher.
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Looking ahead, indications that interest rates have peaked and the next move will be downwards are expected to be of particular interest to investors and may prompt them to start closing the gap on prices in anticipation of a new cycle.