CB Richard Ellis: Slow recovery for Sydney CBD strata market

SYDNEY: CB Richard Ellis anticipates the Sydney central business district (CBD) strata market to slowly recover with more moderate sales transaction numbers expected over the second half, especially when compared with the highs seen prior to 2008.

It added that the Sydney CBD strata office market is set to continue to be an affordable means of direct property ownership.

"A rising rate in the CBD leasing market has given potential owner occupiers of strata space further leasing options, whilst capital values seem to have remained on a slow yet steady path towards the positive results of past years. This will be dependent on rising interest rates and other factors including retail trade and white collar employment," it said.

The total sales volume of office strata property in the CBD fell during the first six months of 2010, as the property market attempts to recover from the impacts of the global economic crisis. Over the first six months, some 65 sales were recorded in the Sydney CBD, down from the 78 and 100 sales recorded in the first and second halves of 2009 respectively.

CB Richard Ellis said this situation is partly caused by a lack of investment stock available to prospective purchasers.

The strata retail market, meanwhile, demonstrated positive results overall during the first half this year when compared to the same period last year. Retail strata sales volume increased by 34% with the Southern subsector emerging as the outstanding performer, accounting for almost half of the total number of transactions in the strata retail market in the six months to July.

Average capital values also increased across almost all subsectors in the first-half of 2010, with the core leading the charge, averaging A$17,621 (RM54,115.52) psm as at July.

Moving forward, the real estate research company said forecasts indicate that a lack of supply is expected to drive up rents in the CBD over the next three years. Demand for both office and retail strata property is expected to be positive, with potential owner occupiers looking to cut cost and investors in the sub A$5 million category looking to take advantage of the CBD's rental growth potential.

It noted, however, that rising interest rates could prove a hindrance to any capital value growth as potential purchasers are forced to consider increased holding costs over the short to medium term.