Parramatta’s property market continues its renaissance

As Parramatta continues to transition into Sydney’s second largest commercial hub, Capital Property Funds looks to capitalise on this through the divestment of the KPMG building at 91 Phillip Street.

The nine-storey A Grade office building is being sold with 100 percent freehold interest.

Savills Australia’s Simon Fenn, Graeme Russell and Tim Grosmann, in conjunction with Inc RE’s Steven Kearney and Mark Hansen, have been appointed to market the property via domestic and international expressions of interest.

Mr Fenn said the team was expecting interest from a diverse range of potential purchasers, local institutions, private and offshore investors.

“Record CBD office prices and rental rates are pushing companies to consider Sydney’s outer suburbs, with Parramatta quickly becoming a popular cost-effective option,” he said.

“The Parramatta office market is the most exciting in Australia, as it transitions into ‘Sydney’s second largest CBD’.

“This is resulting in heightened tenant demand and substantial amounts of private and public sector investment.”

Anchor tenant KPMG generates a solid base of passing income, in addition to leases to flexible workspace solution provider, Regus, and global loss adjusting and claims management company, Cunningham Lindsey.

“With one of the lowest vacancy rates of Australia’s major office markets, Parramatta has witnessed exceptional market renal growth coupled with a significant reduction in market incentives with 91 Phillip Street a beneficiary of this phenomenon,” noted Inc RE’s Mr Steven Kearney.

Built circa 1985, the building comprises ground-level retail space, seven levels of office accommodation, and car parking over ground and 3 above ground levels for about 120 vehicles.

Mr Kearney said the opportunity presents a land rich commercial investment which has strong future development upside, being a north facing corner site with land area of 2,193 square meters.

Mr Fenn said the building has solid fundamentals but in the longer term strong future development upside.

Mr Fenn said the “emergence of Parramatta” is “well and truly underway”, with the level of investment in the CBD and surrounding infrastructure at unprecedented levels.

“Both the federal and state governments are fully engaged, demonstrated by their commitment to major infrastructure projects and long-term leases, providing private enterprise the confidence to follow suit,” he said.”

“The likes of Walker Corporation, Charter Hall, Dexus and GPT are already developing and/or investing in major office projects within Parramatta.”

“This is a generational change that will cement Parramatta as Sydney’s second CBD and capital of the burgeoning western suburbs.”

Mr Kearney added that Parramatta was positioned to become Australia’s largest suburban office market by 2021, with more than 200,000sq m of office space to be delivered during this period.

“More than 50 percent of this impending supply has already been leased, including 42,000sq m to National Australia Bank, which is consolidating seven Sydney locations into 3 Parramatta Square,” he said.

“In addition, the NSW government aims to create a planning and environment hub in Parramatta by committing to 65,000sq m and relocating 4,100 public service jobs to 4 Parramatta Square.”

Parramatta’s infrastructure pipeline, including the pending development of the Western Sydney Airport, Sydney Metro West and Westmead Hospital, the $20 billion WestConnex road investment program, the proposed Parramatta Light Rail and the relocation of the Powerhouse Museum to Parramatta have amplified demand for the area.

“Parramatta currently has Australia’s lowest vacancy level across all major commercial markets, with total vacancy sitting at 3.0 percent and zero A Grade vacancy,” Mr Fenn said.

“We are addressing pent-up demand following a five-year period of limited construction activity and record low A Grade vacancy.”

Expressions of interest close early August.

Learn more about Savills Capital Transactions.