The Sydney CBD office/retail market continues to be one of the tightest CBD markets across Australia. This ‘crunch’ on both retail and office space has had a flow on affect to the inner city suburbs of Sydney.

According to Savills Australia, the Eastern Suburbs office/retail markets continue to strengthen while vacancy rates continue to drop – driven by upbeat economic conditions (in the early months of 2019) and a withdrawal of desirable office space from the Sydney market.

According to Nick Lower, Director, Metropolitan & Regional Sales at Savills Australia, a return to either stable or positive effective rental growth is predicted across all markets.

“The shortage of options over the Eastern suburbs of Sydney means tenant retention rates will grow. However the type of tenants attracted to areas such as Paddington, Surry Hills and Darlinghurst is shifting.

“For example, the traditional main street fashion precinct along Oxford Street in Paddington, a suburb hailed as one of Sydney’s most affluent and sought after locations, has received some flack over the past few years, but that is shifting as landlords look to embrace Sydney’s rising café culture, restaurant vibe and varied range of mixed use needs, from banks, furniture showrooms and 24/7 gyms.

“The area is still filled with creative designers, exquisite boutiques and delicious delicacies, but we are being approached by owners looking to spice things up,” Mr Lower continued.

A local private investor is looking to capitalise on this new trend by selling a prominent two storey freehold building which boasts rear lane access and future potential for separate retail, office or residential spaces and is further complemented by parking at the rear of the property.

Located at 345-347 Oxford Street, the large floor space of approximately 245sq m offers owner-occupiers and businesses ample room for operational use and favourable B4 zoning allowing multiple exit strategies including mixed-use development and future subdivision potential (STCA) and is for sale through Nick Lower, Tom Tuxworth and David Hickey of Savills Australia.

According to Tom Tuxworth, Director, Metropolitan & Regional Sales at Savills Australia, the property is located in a genuine lifestyle location with numerous local cafes and eateries as well as the Paddington market a few doors down on the weekend. The property is also located in one of Sydney’s most affluent areas where the median family income is 94% above the national average.

Mr Tuxworth believes the days of ‘retail only precincts’ are over. “Customers are wanting a large array of services and amenities wherever they go and landlords need to pay attention to this and they are.”

“We are seeing a significant shift in buyer mentality when approaching commercial assets. No longer are buyers viewing existing buildings for what they are or used to be, but they are beginning to see how they can recreate or reposition an asset to maximise their returns,” Mr Tuxworth said.

David Hickey, Senior Executive, Metropolitan & Regional Sales at Savills Australia, said “Traditional ‘office only buildings’, are being closely considered as new warehouse options for fashion outlets, larger scale barber shops and restaurant spaces or even bars. It seems everyone is trying to create their own unique space.

“As information is now more freely available, changing market conditions (whether good or bad), don’t necessarily result in a down turn in activity, more like a shift in mentality from buyers. Those buyers that are able to ‘read the play’ and be nimble, understanding what can and can’t be done tend to reap the rewards down the track,” he said.