Strata office vacancy on the Lower North Shore declined during 2006 and continued to trend below freehold vacancy rates. Strata vacancy was 7.6% as at January 2007, down from 9.5% from 12 months ago. followed by a positive 14,482 sq m in the second half, to bring the total absorption for 2006 to 11,441 sq m. Demand was considerably stronger than experienced in 2005 when just 1,939 sq m of space was taken up.
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Rental growth was experienced across all three North Shore strata precincts, however was strongest in the North Sydney market. Subdued investor demand during 2006 resulted in yields holding steady over the last 12 months, mainly to due to three interest rate increases during 2006.
The North Sydney strata market comprises 83,980 sq m of stock across 26 buildings. This represents 46% of the Lower North Shore strata office stock and is equivalent to 21% of the Sydney CBD strata market. A majority of this stock is B grade (64%) and C grade (33%) and accounts for 10% of the total North Sydney office market. The average size of a strata development in North Sydney is 3,200 sq m.
The North Sydney strata market ha s increased in size by 2.9% over the past three years, this compared to its freehold counterpart, who has experienced a decline in size due to the redevelopment of commercial space, predominately to residential. This growth in stock has been driven by two factors:New mixed developments entering the market typically have a small commercial strata component, which has increased stock levels at a slow but steady rate.