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Boom Times Ahead: Sydney Set for Construction and Rental Highs

Written by Posted On Friday, 26 January 2018 23:25

It is no secret that Sydney has been one of the powerhouses of the Australian economy for some time. However, recent years have seen somewhat flagging figures in terms of vacancies as well as construction as a whole. Thankfully, a report submitted by BIS Oxford Economics has observed that this situation might soon change. Experts predict that Sydney will experience a boom in construction akin to those observed during the 1980s. What factors are behind this movement and how will it impact the local real estate market?


The Impetus behind This Trend

There are a few reasons why this upward momentum is only now coming to pass. The first two are more associated with rising rental prices and extremely low vacancy rates. As the demand for viable and 
high-quality office space continues to grow, constructing new buildings will be essential in order to accommodate the needs of commercial organisations. In other words, we are simply referring to a relationship between supply and demand. The third factor behind this industry boom involves the fact that specific portions of Sydney (such as the CBD and Macquarie Park) are becoming increasingly important commercial hubs. Thus, enterprises are seeking to leverage these locations in order to suit their needs.

Taking into Account Vacancy Rates

As mentioned in the last section, one of the major metrics driving this increase in construction is falling vacancy rates. In fact, BIS Oxford Economics believes that these rates will dip even further from their present value of 6.5 percent to a mere 4 percent by the end of the 2018 fiscal year. These figures have not been seen for over 30 years and they could be even lower within the Central Business District. 

Promising Construction News

With low supply and high demand, it only makes sense that the construction industry should experience a windfall in terms of upcoming projects. It is estimated that over 2 million square metres of office space will need to be built between 2019 and 2023 in order to accommodate the influx of businesses. We should keep in mind that this is in addition to the more than 370,000 square metres of commercial space that will soon to be made available to the public. 

The End of the "Moderate Supply" Cycle

Real estate tends to follow cyclical trends and it appears as if this upswing marks the end of a cycle of moderate supply. In other words, it will soon be time to build once again. Another important point to keep in mind from the point of view of the business is that this movement should also equate to rises in rental prices. Enterprises will need to take this into account when choosing their exact location within Sydney.

A Small Gap between Conceptualisation and Completion

Large construction projects take a number of years to complete. This is why the majority of new commercial spaces will not likely be ready until at least 2019. Still, this is good news for those involved within the construction sector as well as those employed in supporting industries such as transportation and the production of raw materials. 

Sydney does indeed appear to be headed for burgeoning financial times. As vacancy rates continue to fall, the commercial real estate market should enjoy sustained levels of growth for some time. Let's also not fail to mention that such a positive shift will have a massively beneficial impact upon job opportunities throughout Sydney and the surrounding areas; an advantage that should never be overlooked. For all intents and purposes, the future of this city looks bright.

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