Raine & Horne Commercial

NSW - Parramatta Yields in the Parramatta Greater region range from 4.5-5.0% for industrial assets through to 5.0-5.5% for retail and office assets. Christian Cirillo of Commercial Parramatta says yields on retail assets could fall owing to the lingering impact of COVID-19 on consumer discretionary spending. However, the same factor could drive a 50-basis point increase on industrial yields as the trend to online shopping gains traction. Office yields are expected to fall as the pandemic may have a lasting impact on how office workers and companies utilised work-from-home opportunities. This is coupled with an upswing in vacancy rates due to a growing office sublease market in Parramatta. As a guide to how each sector is faring, Christian says vacancy rates on retail property are at 15.0% because “there is plenty of new vacancy”. Industrial property (2.0%) and office assets (3.0%) are both experiencing far lower vacancies. According to Christian, the industrial market has bounced back with massive ‘per square metre’ rate increases from $650 up to $1,200 per square metre in some Western suburb locations. This has been driven by overseas buyers wanting land for data centres, however COVID-19 has also supported demand for logistic warehousing needs. Christian notes, “we have small industrial land lots in Marsden Park coming to market at $900 per square metre – land that would have been listed at $450 per square metre just three years ago.” Christian says the retail market in Parramatta has faced a number of headwinds. Much of the city is being affected by road works, and these have impacted retail strips more than the COVID-19 pandemic. “Once the roadworks are completed, the prospects for Parramatta retail will bounce back strongly” notes Christian. “We have also seen a revival in ribbon strip retail (neighbourhood villages). People are working from home a lot more, so they are visiting their local restaurant or café, and also supporting local butchers, newsagents and bakeries.” Christian points out that Northmead Shopping Village on the fringe of the Parramatta CBD has seen turnover increase for the resident florist, butcher and other specialty shops. Parramatta is well-placed for the office market. As Christian notes, “suburban office markets are strong. We are seeing businesses decentralising out of Sydney CBD and into Parramatta.” He adds that “Parramatta seems to be one of the more COVID-19 proof office markets along the eastern seaboard, with less rental incentives required to attract new tenants.” As evidence of the strength of the Parramatta market, Christian and his team have notched up a number of off-market sales recently, chiefly development sites including a 600 square metre vacant lot for $9 million. 21 - Christian Cirillo ccirillo@rhc.com.au