The Sydney CBD Strata Office market has had a steady growth profile from the last 12 months. This has been evidenced by the number of strata office sales in the FY 2017, just over $240 million; this is an increase of 4.5% over the 2016 FY, with 2016 FY experiencing a 54% increase.

The Sydney CBD Strata Office market has had a steady growth profile from the last 12 months. This has been evidenced by the number of strata office sales in the FY 2017, just over $240 million; this is an increase of 4.5% over the 2016 FY, with 2016 FY experiencing a 54% increase.

In terms of averaged capital values, our research indicated that the higher end psm sales price is now $10,000 - $13,000 psm across the CBD, this is a 12.5% increase in the past 12 months. The average strata sales price for actual suites is now $1,206,117, which is a notable increase, well above the historical long-term average.

The key drivers for this substantial value/ price growth continues to be the culmination of numerous B grade office buildings being withdrawn from the leasing market and being redeveloped for new office building developments or State Government compulsory acquisition to make way for the new Metro railway. 

Many smaller companies that have been leasing office space are now looking to take greater control over their premises and seeking to purchase strata office accommodation. Investors are also looking to secure leased or vacant office suites, as the CBD Office leasing market heats up and again this is witnessed with the skyrocketing rentals being achieved in other B grade buildings.

Additionally, the owner-occupiers are looking to take advantage of the favourable rulings of owning commercial property within their SMSF.

Investors and the new crop of owner occupiers coming out of B grade office buildings are all enjoying a low-interest rate environment.

An important point to understand is that supply or lack thereof, is one of the fundamentals that underpin values and since 2012, with the completion of the strata subdivision of 350 George Street, Sydney (formerly Societe Generale House) no new strata development projects have been submitted. However, with recent reforms to strata, in particular, the Strata Schemes Management Act 2015, this legislation paves the way for the collective sale of a strata scheme upon 75% of registered owners being in agreement.

This reduced threshold could mean that existing strata schemes may be more easily sold, developed and potentially converted into other uses. On the other hand impact the supply of current levels of strata supply volume, with potential new projects coming to market in the next 24-36 months and possibly subduing price growth.