Sydney Commercial Real Estate: Market Analysis and Opportunity

This report assesses the Sydney commercial real estate market, noting a 50% rise in effective rental rates and low vacancy despite ample office space. Increased white-collar employment and significant offshore investment (51% of transactions) drive demand. The report highlights a potential investment opportunity: a property near China Town and the CBD, valued at $25 million with a $1,120,000 annual income, positive NPV of $319,453 and IRR. Factors like customer focus and IT hub development suggest future valuation increases. The recommendation is to acquire the property for up to $25 million, capitalizing on the supply shortage and rising demand.

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Sydney Commercial Real estate turning into an exclusive princely state
The first three months of the current fiscal year saw a rise of 50 percent in the effective rental
rates. In spite of a huge supply of the office space the vacancy rates in the area are on the
lower side (Williams, 2018). There is a lack of supply for commecrial office rentals in the area.
Apart from these direct indicators, certain indirect indicators are also supporting a rise in the
demand as well as the profits associated with the office real sectors. For instance, the
increasing number of white-collar employees has touched the levels of two lakh employees
per annum. Another factor is connected with the offshore stakeholders in the market. During
the previous year, 51 percent of the transactions in this area were connected to the offshore
investors (Cheung, 2011).

A lack in supply and an increase in the demand makes it a promising market for the inevstors because
investors from the Asian markets are also showing a keen interest in the properties of this area. Considering
the same facts we are also presenting a property that can interest you.
Strategically located near the China Town and CBD the total worth of this property can be estimated at
around $25 million. It can become a jewel in your asset portfolio with an estimated incurring income of
$1,120,000 per annum. The DCF analysis results show a positive NPV of $ 319 and IRR. Factors like Customer
focus, development of the area as an IT hub and a projection for the yield improvement are always on the
cards to increase the valuation of this property in the near future.
Bibliography
Cheung, A. (2011). FLOOD OF COWORKING SPACES PUSHES DESK RATES DOWN IN ALL CAPITAL CITIES
EXCEPT CANBERRA. Commercial Real Estate , https://www.commercialrealestate.com.au/news/flood-of-
coworking-spaces-pushes-desk-rates-down-in-all-capital-cities-except-canberra/.
Williams, S. (2018). SYDNEY’S CBD OFFICE RENTAL GROWTH IS AT ITS HIGHEST RATE EVER: CBRE. Commerical
Real Estate , https://www.commercialrealestate.com.au/news/sydneys-cbd-office-rental-growth-is-at-its-
highest-rate-ever-cbre/.