Rental Values Sydney CBD prime and secondary net face rents (NFR)20 ended 2023 at A$1,436 per sq m/annum and A$999 per sq m/annum, respectively. These figures marked YoY increases of 7.3% and 0.9%. Face rents in the CBD have continued to be driven by rental rates in newly completed Premium assets, freshly renovated Grade-A office buildingswithbetter quality fit-outs, and inflationary pressures, particularly in the construction sector. While face rental rates continued to increase over 2023, a significant portion of this growth has been offset by increases in incentives. Prime and secondary incentives stood at 33.3% and 36.0% by year-end 2023 respectively. These figures marked increases of 0.2 and 1.0 percentage points over the 12-month period, with the largest increases being seen in precincts with elevated vacancy rates. At this time, incentives are typically being used by occupiers to fit-out their spaces before occupation. While face rental rates increased for both prime and secondary spaces in 2023, net effective rental rate21 growth was mixed due to the relative increases in incentives. Prime and Secondary net effective rental rates ended 2023 at A$875 per sq m/annum and A$572 per sq m/annum, respectively. Prime net effective rents increased by 7.5% YoY as incentives only increased marginally over the period. Conversely, secondary net effective rents declined by 1.1% in 2023 due to incentives increasing by 1.0 percentage point over the same period. Going forward, effective rent growth is expected to continue to bifurcate across building grade. Rent growth will be strongest in prime assets as a flightto-quality continues to drive demand for this space. It is likely that face rents will continue to increase both in prime and secondary properties. However, incentives in secondary stock will remain more elevated than in prime assets. Source: CBRE Australia Office Leasing, CBRE Australia Research, 4Q 2023 SYDNEY CBD OFFICE LEASING ENQUIRY BY SIZE GROUP 20 Base rent paid by a tenant excluding (or net of) outgoings. 21 Base rent that would be achieved, less the incentives paid by the owner. The average net effective rent for a market is the market net face rent less incentives which are amortised over the term of the lease. SYDNEY CBD OFFICE ENQUIRY VOLUME SYDNEY CBD OFFICE LEASING ENQUIRY BY INDUSTRY (2023) Enquiry Volume No. of Briefs 600 500 400 300 200 100 0 6 5 4 3 2 1 0 Enquiry Volume ('000 sq m) No. of Briefs '00 2023 2021 2019 2022 2020 Finance and Insurance 19.3% Tech & IT 18.9% Professional Services 13.4% Government and Infrastructure 11.0% Legal 8.3% Property 4.7% Education and Training 2.8% Media and Telecommunications 2.8% Other 18.8% 600 500 400 300 200 100 0 No. of Briefs 2023 2022 2020 2019 2021 0-500 sq m 501-1,000 sq m 1,001-3,000 sq m 3,000+ sq m Overview Leadership Performance Framework Other Information ANNUAL REPORT 2023 115
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