Sydney Market Outlook 2012 Part 7- Panel Discussion

**Sydney Market Update**

The Sydney market is undergoing significant changes, with various sectors experiencing shifts in demand and supply. One of the key areas of focus is the office sector, where the lack of employment growth in the finance and other industries is being felt.

According to a graph put up by an expert, over the last five years, there has been very little growth in employment in the Sydney CBD across finance and other industries. Most of this growth has come from property and business services, primarily driven by the industry's ability to attract and retain staff through flexible workspaces. These workspaces have become increasingly desirable, driving a shift towards more flexible business operations.

However, this trend is not expected to change in the near future, with many businesses opting to drive more value out of their real estate rather than increasing employment numbers. The lack of employment demand has significant implications for office developers and owners, who must adapt to changing market conditions.

One strategy being employed by some developers is defensive restructuring, where multiple stakeholders come together to address potential issues such as backfill space and lease profiles. For example, an Owners Group has been formed at 20 Martin Place to employ a defensive strategy, focusing on remodeling the destination of the site rather than undertaking redevelopment or refurbishment.

The office sector's struggles are also being felt by developers looking to convert existing buildings into residential apartments. The Stag end lease dates have caused problems in being able to free up assets for conversion, and demand for these sites remains strong, driven primarily by offshore developers interested in buying into the City Market.

**Industrial Market Update**

The industrial market is experiencing a different set of challenges and opportunities. According to Jason Edge, with vacancy rates below 3% in some areas, developers are taking advantage of this scarcity to undertake speculative developments.

However, these developments are distinct from those seen in the past few years, where large quantities of space were being developed and competing for limited inquiries. Today's developments are smaller, with a focus on specific locations and sizes, driven by changing market conditions.

The impact of these developments is positive, driving up rents and incentives. However, the pre-lease market is slower, with over 350,000 square meters worth of briefs currently available for various hubs across Eastern Creek and Uren Park. The reality is that only a few DNCs are being completed this year, and only two in January, compared to the rapid development seen in previous years.

**Leasing Market Conditions**

Leasing market conditions remain tight, driven by the lack of employment growth in the finance and other industries. According to Janine Cranston, "the lack of employment demand is a critical factor for Sydney CBD". The graph showing employment numbers over the last five years highlights this trend, with property and business services being the main drivers of growth.

The finance industry has been particularly hard hit, with only big players remaining active. This lack of activity is having a significant impact on office developers and owners, who must adapt to changing market conditions.

**Office Leasing Market**

The office leasing market is experiencing significant challenges, driven by the lack of employment growth in the finance and other industries. According to an expert, "there's been very little growth in employment in the Sydney CBD across finance and other industries over the last five years". Most of this growth has come from property and business services.

This trend is not expected to change in the near future, with many businesses opting to drive more value out of their real estate rather than increasing employment numbers. The lack of employment demand has significant implications for office developers and owners, who must adapt to changing market conditions.

**Industrial Leasing Market**

The industrial leasing market is experiencing a different set of challenges and opportunities. According to Jason Edge, with vacancy rates below 3% in some areas, developers are taking advantage of this scarcity to undertake speculative developments.

**Sydney Market Outlook**

The Sydney market outlook remains positive, driven by ongoing demand for office space and industrial land. However, developers must adapt to changing market conditions, including the lack of employment growth in the finance and other industries.

As the market continues to evolve, it is essential to stay informed about the latest trends and opportunities. Developers looking to capitalize on these changes must be prepared to respond quickly and effectively, whether through defensive restructuring or speculative development.

"WEBVTTKind: captionsLanguage: enplease welcome Janine Cranston Rob Saul Joshua Charles Jason Edge Steve Lurch aliser Palmer and David Milton welcome panel um so this morning we'd like to run through some some key questions for each sector um I'd like to start with and in the context of what we've you've just heard about the global environment and the local environment i' like to start with the office sector specifically around to Rob Su what has been driving investment activity in the office space recently well Steve I think the interesting thing I saw this morning is that the graphs that Nick and yourself are putting up is matching with what's happening on the street it's all about demand for Prime real estate it's all about the best everyone wants the best assets at the moment and the trends for this year we've had 2 a half billion dollars worth of transactions in Sydney obviously bangaroo distorted the figures with two billion but it's all about prime the big issue that we see is very much these investors getting these assets the foreigners last year absorbed 59% of the stock and they're still very keen to invest in Australia but they've got real competition now last year we saw the roots selling assets to fund share BuyBacks they've stopped doing this they're now an acquir of stock they now see some strength in these markets their cost of capital's down and the cost of debts down so it's all about getting set so the focus is going to be very much on the secondary markets where the roots will continue to sell assets with very much non-core we got a lot of the closed in funds looking to sell out of assets however that market and the pull of buyers is thin I think the best example we saw was really seeing 20 Martin place last year which we sold for $95 million we had 19 offers this year we put up a similar asset 6 to 10 a Connell Street we had only six these investors looking for secondary stock are fiveyear holders so they're very much fixated on what's going to happen over the next 5 years they're concerned with leasing costs tenant retention they're working out letting voids and they're even saying to us look can we sell this in 5 years and what price will we we achieve so all what this is doing is actually creating a price Gap right now so for secondary we're seeing probably about a 5% price Gap we actually found an investor who's been very active in this sector made a billion dollars worth of offers over the last four months and they haven't bought anything so I think our issue confronting us is if the sentiment changes and some confidence in the leasing Market comes through we'll see more activity thanks Rob just on that issue then um let's talk about uh leasing market conditions there's a there's a graph that I've just put up there that shows um that over the last five years there's been very little growth in employment in the Sydney CBD across finance and other Industries um and that most of that growth come through property and probably largely Business Services but Janine and Cranston what are we actually seeing around the the leasing markets and and the risks attached to that well Steve big question um the lack of employment demand is a a critical factor for Sydney CBD um your graph here certainly shows that um property and business services is fairing well and that's certainly what we're seeing on the ground uh of that component that includes uh legal accounting uh and insurance uh 2012 indeed the last 12 months have seen strong demand from legal and there've been a good number of of players in the market um Finance has been absolutely nowhere to be seen the big players of lockedown but the organ organic growth that Sydney has been traditionally uh backed by is nowhere to be seen now that not likely to change in the next 12 months or indeed the next 24 months um we are seeing um businesses across the board drive more value out of their real estate uh the the trend to ABW workplaces and other flexible workspaces has being something that we don't see as a short-term Trend rather we see that as a shift in in business uh operation and because these workspaces are so desirable they're also fundamentally um uh sound at attracting and and retaining staff um the other thing I would say is um a lot of conjecture over bangaroo um and while that will create a good deal of stock in the future the backfill space comes from right across the city um so will create competition and backfill uh challenges for our clients um and we're seeing defensive strategies off the back of this um such as um well a very good example is 20 is um Martin place where we have an Owners Group getting together to employ a defensive strategy so we've got a group remodeling the destination of Martin place other such defensive strategies will be required so we have uh reinvigoration reuse uh refurbishment Redevelopment and we've got stock being taken out of the city um for a potential change of use to to residential thank you yeah just in terms of that backfield space um David Milson what what are the opportunities for redevelopment um and conversion to residential do you think it's very strong biod demand in the city for residential apartments and we've recently over the last 12 months we've looked at a number of buildings for conversion to residential and we see that it's going to be probably very strong Market one of the issues has been the um lease profile on some of the buildings where the Stag um end lease dates has caused problems in being able to free up the assets for conversion who do you think's likely to drive the conversion activity well both local and offshore developers um we've been fing more inquiry offshore from developers wanting to buy into the City Market they're particularly interested in the CBD and the larger development sites um and then there's a large number of local developers that are actively looking for sites in the city okay just turning to um change let's turn to Industrial um this is a map of industrial regions across Sydney with some relevant metrics um Jason Edge what what trends are we seeing in industrial demand across syney and what's driving those changes what's driving it uh if you look at the outer Northwest uh the Central West and uh the outer Central West and the vacancy rates of all sub 3% and in some instances uh less than 1% in the outer Northwest uh what we're actually seeing now is developers taking advantage of that and and going back to speculative development which has occurred probably the last 6 to 12 months what's different from this Tran of developments compared to say 20067 is we had 130,000 square meters of of developments more or less coming online at once and competing for the same 10 to 12,000 square meter inquiries uh the developments now are slightly different whether that be due to to timing of completion size uh or location uh what that's doing that's having a positive impact on on rents and also incentives but I guess if you look at the the prel market um it is uh a fair bit slower we've certainly got a lot of activity in inquiry um we'd have over 350,000 square meters worth of briefs in the market currently for that sort of that Hub I guess if you can call of Eastern Creek uren Park but the reality is there's only five uh dnc's being completed this year and two in January so it's very different compared to this to the stabilized assets thank you and Joshua Charles what what shifts are there in invest cuity and Industrialplease welcome Janine Cranston Rob Saul Joshua Charles Jason Edge Steve Lurch aliser Palmer and David Milton welcome panel um so this morning we'd like to run through some some key questions for each sector um I'd like to start with and in the context of what we've you've just heard about the global environment and the local environment i' like to start with the office sector specifically around to Rob Su what has been driving investment activity in the office space recently well Steve I think the interesting thing I saw this morning is that the graphs that Nick and yourself are putting up is matching with what's happening on the street it's all about demand for Prime real estate it's all about the best everyone wants the best assets at the moment and the trends for this year we've had 2 a half billion dollars worth of transactions in Sydney obviously bangaroo distorted the figures with two billion but it's all about prime the big issue that we see is very much these investors getting these assets the foreigners last year absorbed 59% of the stock and they're still very keen to invest in Australia but they've got real competition now last year we saw the roots selling assets to fund share BuyBacks they've stopped doing this they're now an acquir of stock they now see some strength in these markets their cost of capital's down and the cost of debts down so it's all about getting set so the focus is going to be very much on the secondary markets where the roots will continue to sell assets with very much non-core we got a lot of the closed in funds looking to sell out of assets however that market and the pull of buyers is thin I think the best example we saw was really seeing 20 Martin place last year which we sold for $95 million we had 19 offers this year we put up a similar asset 6 to 10 a Connell Street we had only six these investors looking for secondary stock are fiveyear holders so they're very much fixated on what's going to happen over the next 5 years they're concerned with leasing costs tenant retention they're working out letting voids and they're even saying to us look can we sell this in 5 years and what price will we we achieve so all what this is doing is actually creating a price Gap right now so for secondary we're seeing probably about a 5% price Gap we actually found an investor who's been very active in this sector made a billion dollars worth of offers over the last four months and they haven't bought anything so I think our issue confronting us is if the sentiment changes and some confidence in the leasing Market comes through we'll see more activity thanks Rob just on that issue then um let's talk about uh leasing market conditions there's a there's a graph that I've just put up there that shows um that over the last five years there's been very little growth in employment in the Sydney CBD across finance and other Industries um and that most of that growth come through property and probably largely Business Services but Janine and Cranston what are we actually seeing around the the leasing markets and and the risks attached to that well Steve big question um the lack of employment demand is a a critical factor for Sydney CBD um your graph here certainly shows that um property and business services is fairing well and that's certainly what we're seeing on the ground uh of that component that includes uh legal accounting uh and insurance uh 2012 indeed the last 12 months have seen strong demand from legal and there've been a good number of of players in the market um Finance has been absolutely nowhere to be seen the big players of lockedown but the organ organic growth that Sydney has been traditionally uh backed by is nowhere to be seen now that not likely to change in the next 12 months or indeed the next 24 months um we are seeing um businesses across the board drive more value out of their real estate uh the the trend to ABW workplaces and other flexible workspaces has being something that we don't see as a short-term Trend rather we see that as a shift in in business uh operation and because these workspaces are so desirable they're also fundamentally um uh sound at attracting and and retaining staff um the other thing I would say is um a lot of conjecture over bangaroo um and while that will create a good deal of stock in the future the backfill space comes from right across the city um so will create competition and backfill uh challenges for our clients um and we're seeing defensive strategies off the back of this um such as um well a very good example is 20 is um Martin place where we have an Owners Group getting together to employ a defensive strategy so we've got a group remodeling the destination of Martin place other such defensive strategies will be required so we have uh reinvigoration reuse uh refurbishment Redevelopment and we've got stock being taken out of the city um for a potential change of use to to residential thank you yeah just in terms of that backfield space um David Milson what what are the opportunities for redevelopment um and conversion to residential do you think it's very strong biod demand in the city for residential apartments and we've recently over the last 12 months we've looked at a number of buildings for conversion to residential and we see that it's going to be probably very strong Market one of the issues has been the um lease profile on some of the buildings where the Stag um end lease dates has caused problems in being able to free up the assets for conversion who do you think's likely to drive the conversion activity well both local and offshore developers um we've been fing more inquiry offshore from developers wanting to buy into the City Market they're particularly interested in the CBD and the larger development sites um and then there's a large number of local developers that are actively looking for sites in the city okay just turning to um change let's turn to Industrial um this is a map of industrial regions across Sydney with some relevant metrics um Jason Edge what what trends are we seeing in industrial demand across syney and what's driving those changes what's driving it uh if you look at the outer Northwest uh the Central West and uh the outer Central West and the vacancy rates of all sub 3% and in some instances uh less than 1% in the outer Northwest uh what we're actually seeing now is developers taking advantage of that and and going back to speculative development which has occurred probably the last 6 to 12 months what's different from this Tran of developments compared to say 20067 is we had 130,000 square meters of of developments more or less coming online at once and competing for the same 10 to 12,000 square meter inquiries uh the developments now are slightly different whether that be due to to timing of completion size uh or location uh what that's doing that's having a positive impact on on rents and also incentives but I guess if you look at the the prel market um it is uh a fair bit slower we've certainly got a lot of activity in inquiry um we'd have over 350,000 square meters worth of briefs in the market currently for that sort of that Hub I guess if you can call of Eastern Creek uren Park but the reality is there's only five uh dnc's being completed this year and two in January so it's very different compared to this to the stabilized assets thank you and Joshua Charles what what shifts are there in invest cuity and Industrialplease welcome Janine Cranston Rob Saul Joshua Charles Jason Edge Steve Lurch aliser Palmer and David Milton welcome panel um so this morning we'd like to run through some some key questions for each sector um I'd like to start with and in the context of what we've you've just heard about the global environment and the local environment i' like to start with the office sector specifically around to Rob Su what has been driving investment activity in the office space recently well Steve I think the interesting thing I saw this morning is that the graphs that Nick and yourself are putting up is matching with what's happening on the street it's all about demand for Prime real estate it's all about the best everyone wants the best assets at the moment and the trends for this year we've had 2 a half billion dollars worth of transactions in Sydney obviously bangaroo distorted the figures with two billion but it's all about prime the big issue that we see is very much these investors getting these assets the foreigners last year absorbed 59% of the stock and they're still very keen to invest in Australia but they've got real competition now last year we saw the roots selling assets to fund share BuyBacks they've stopped doing this they're now an acquir of stock they now see some strength in these markets their cost of capital's down and the cost of debts down so it's all about getting set so the focus is going to be very much on the secondary markets where the roots will continue to sell assets with very much non-core we got a lot of the closed in funds looking to sell out of assets however that market and the pull of buyers is thin I think the best example we saw was really seeing 20 Martin place last year which we sold for $95 million we had 19 offers this year we put up a similar asset 6 to 10 a Connell Street we had only six these investors looking for secondary stock are fiveyear holders so they're very much fixated on what's going to happen over the next 5 years they're concerned with leasing costs tenant retention they're working out letting voids and they're even saying to us look can we sell this in 5 years and what price will we we achieve so all what this is doing is actually creating a price Gap right now so for secondary we're seeing probably about a 5% price Gap we actually found an investor who's been very active in this sector made a billion dollars worth of offers over the last four months and they haven't bought anything so I think our issue confronting us is if the sentiment changes and some confidence in the leasing Market comes through we'll see more activity thanks Rob just on that issue then um let's talk about uh leasing market conditions there's a there's a graph that I've just put up there that shows um that over the last five years there's been very little growth in employment in the Sydney CBD across finance and other Industries um and that most of that growth come through property and probably largely Business Services but Janine and Cranston what are we actually seeing around the the leasing markets and and the risks attached to that well Steve big question um the lack of employment demand is a a critical factor for Sydney CBD um your graph here certainly shows that um property and business services is fairing well and that's certainly what we're seeing on the ground uh of that component that includes uh legal accounting uh and insurance uh 2012 indeed the last 12 months have seen strong demand from legal and there've been a good number of of players in the market um Finance has been absolutely nowhere to be seen the big players of lockedown but the organ organic growth that Sydney has been traditionally uh backed by is nowhere to be seen now that not likely to change in the next 12 months or indeed the next 24 months um we are seeing um businesses across the board drive more value out of their real estate uh the the trend to ABW workplaces and other flexible workspaces has being something that we don't see as a short-term Trend rather we see that as a shift in in business uh operation and because these workspaces are so desirable they're also fundamentally um uh sound at attracting and and retaining staff um the other thing I would say is um a lot of conjecture over bangaroo um and while that will create a good deal of stock in the future the backfill space comes from right across the city um so will create competition and backfill uh challenges for our clients um and we're seeing defensive strategies off the back of this um such as um well a very good example is 20 is um Martin place where we have an Owners Group getting together to employ a defensive strategy so we've got a group remodeling the destination of Martin place other such defensive strategies will be required so we have uh reinvigoration reuse uh refurbishment Redevelopment and we've got stock being taken out of the city um for a potential change of use to to residential thank you yeah just in terms of that backfield space um David Milson what what are the opportunities for redevelopment um and conversion to residential do you think it's very strong biod demand in the city for residential apartments and we've recently over the last 12 months we've looked at a number of buildings for conversion to residential and we see that it's going to be probably very strong Market one of the issues has been the um lease profile on some of the buildings where the Stag um end lease dates has caused problems in being able to free up the assets for conversion who do you think's likely to drive the conversion activity well both local and offshore developers um we've been fing more inquiry offshore from developers wanting to buy into the City Market they're particularly interested in the CBD and the larger development sites um and then there's a large number of local developers that are actively looking for sites in the city okay just turning to um change let's turn to Industrial um this is a map of industrial regions across Sydney with some relevant metrics um Jason Edge what what trends are we seeing in industrial demand across syney and what's driving those changes what's driving it uh if you look at the outer Northwest uh the Central West and uh the outer Central West and the vacancy rates of all sub 3% and in some instances uh less than 1% in the outer Northwest uh what we're actually seeing now is developers taking advantage of that and and going back to speculative development which has occurred probably the last 6 to 12 months what's different from this Tran of developments compared to say 20067 is we had 130,000 square meters of of developments more or less coming online at once and competing for the same 10 to 12,000 square meter inquiries uh the developments now are slightly different whether that be due to to timing of completion size uh or location uh what that's doing that's having a positive impact on on rents and also incentives but I guess if you look at the the prel market um it is uh a fair bit slower we've certainly got a lot of activity in inquiry um we'd have over 350,000 square meters worth of briefs in the market currently for that sort of that Hub I guess if you can call of Eastern Creek uren Park but the reality is there's only five uh dnc's being completed this year and two in January so it's very different compared to this to the stabilized assets thank you and Joshua Charles what what shifts are there in invest cuity and Industrial\n"

Random Videos