Sydney’s rising skyline is expected to eventually result in an increase in office tower rents, according to Knight Frank agents. Knight Frank’s latest research, Global Cities: Skyscrapers 2015 report, discusses the current global skyscraper building boom and the benefits of these giant buildings.
According to the report, skyscrapers are the optimum means of addressing major economic and geographic challenges facing cities today. Knight Frank’s Head of Office Agency for Australia, John Preece, said, “From a commercial perspective, landlords can charge higher rents for upper floors, which could support the commercial position for high-rise development. Rents in Sydney’s premium towers are also increasing.”
Knight Frank is the exclusive leasing agent for the Gateway building at 1 Macquarie Place, and recently secured Sydney’s highest rents to date of $1,550 per square metre, per annum net. “Gateway attracts international tenants because it is a premium-grade building offering uninterrupted views of the Sydney Harbour Bridge and Opera House. At present, Knight Frank has no vacant space available for lease but has a waiting list of interested tenants who would like to become occupiers,” said Mr Preece.
Also in Sydney, average upper-level Barangaroo rents are approximately $1,250 – $1,400 per square metre, per annum net. Over the next two years, Sydney will add to its skyline the triple skyscraper International Towers cluster at Barangaroo, a major dockside redevelopment. Anchor tenants will include HSBC, KPMG, PwC and Westpac.
The complex will include more than 800 apartments, a hotel, and shops, while Renzo Piano has been commissioned to design three new residential towers at Barangaroo South. Knight Frank’s latest Skyscraper Index, within the report, indicates Sydney is the seventh leading city for skyscrapers, taking into account a number of factors. These include skyscraper office rents and yields, the spread offered by investment yields compared to national bonds, the number of high rises built, and growth prospects for the city.
Hong Kong came in at number one globally, followed by New York, Tokyo, London, San Francisco, Singapore and then Sydney. According to Mr Preece, global cities are developing taller, higher-density buildings as a result of limited land availability – however this is not necessarily the case across Australia.
“In Australia we have been blessed with land which has allowed urban ‘sprawl’, even in our larger cities, Sydney and Melbourne. However, changing demographics demands higher-density CBDs. Australia’s cities are relatively low rise on a global scale. However, land availability is now drying up and we are seeing office buildings being withdrawn for residential development – reducing existing office space and the ability to develop more stock.
“Consequently, we will soon be left with no option but to go high. Changing demographics also demands higher-density CBDs. People want to live in cities where they can walk to work and have immediate access to a range of leisure and dining options,” said Mr Preece. Knight Frank’s Head of Institutional Sales for Australia, James Parry, said global real estate capital markets are seeing more activity from those who wish to deploy money in very large sums – above the $1 billion mark globally, or $500 million in Australia.
“The size of skyscrapers makes them attractive to such investors, and this will encourage a movement towards developing in scale. There is a shift in the global economy towards city centres of gateway cities, and skyscrapers are successfully delivering the volume and type of homes and offices our cities require.”
Five Future Trends
Below is a summary of five trends that will encourage the Global Cities to go upwards, making skyscrapers an essential component of urban growth.
1. New technology – Emerging to make the rise of buildings both possible and cost effective.
2. Living in the city – Rapid population growth in cities across the globe is creating megacities. For western cities, towers offer a means of matching the popularity of living near work in densely-developed inner cities.
3. Business clusters – Rather than technology making businesses spread out further, which was expected, the new wave of digital companies has shown a strong propensity to cluster. This is anticipated to grow in future, which may spur a raft of new skyscrapers.
4. Limiting sprawl – The outward spread of cities can create problems of extending transport networks, building on green fields, and imposing longer commutes on staff. It can also create political and municipal funding problems, while skyscrapers reduce the need for sprawl.
5. The community city – With towers allowing more people to live in the centre, CBDs no longer become ghost towns outside of office hours, encouraging a weekend and evening economy of shopping, culture and tourism.
Image credit: ‘Early morning on north side’ by Nicki Mannix via Creative Commons Attribution 2.0