This demand from purchasers, coupled with the tight rental market and associated rental growth has seen further tightening of yields in the Near City precincts. Current median prime yields for the Near City market is 7.3% with a yield range of 7.0% – 7.6%. In common with many investment markets the yield band is very tight, with assets being priced by the market in a very similar manner, reflecting the overall confidence in the market.
The appetite for investment product has also seen the yield for the Near City areas increasingly mirror those for the CBD. The yield differential between prime Near City and prime CBD properties is currently 30 basis points (7.0% compared with 7. 3%), by comparison just over five years ago in early 2001, this was 125bps (8.1% against 9.35%).
This reflects a re-weighting by the market of the risk factors associated with the Near City office markets, as the non-CBD office markets have matured and gained permanent tenant acceptance, and is not unique to the Brisbane market.
The Near City market has been performing exceptionally well with strong rental growth and falling median yields enhancing investors’ total returns property inspections and prepare conveyancing report. The Near City precincts are expected to maintain their strong performance, with sustained low vacancy levels, through to mid-2007 when the quantum of new supply begins to bring some liquidity to the market.
Following rental growth of some 20% during the past 12 months, the Near City is expected to see further, although slowing, rental growth over the coming three years. On average this rental growth will be in the order of 4.6% per annum.
he Lower North Shore strata market comprises 182,400 sq m of office stock across three precincts and equates to 46% of the Sydney CBD strata market. A vast majority of strata stock located on the Lower North Shore is of B and C grade quality. The market has experienced strong growth in size over the past three years, expanding by 11% (18,800 sq m), compared to its free hold counterpart, which has declined 4% due to redevelopment and conversions, predominately to residential use.