Parramatta is one of the busiest suburbs of metropolitan Sydney, driven by the onset of the $2 billon Parramatta Square urban renewal project, and the planned office and apartment developments across the central business district.
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The Parramatta City Council is undertaking an $8 billion revitalisation program and already big names, such as KMPG, have made the city their home.
There is also the new University of Western Sydney campus and the proposed office tower at Westfield Parramatta shopping centre.
The three-hectare Parramatta Square – located in the core of the central business district – will ultimately comprise about 190,000 square metres of commercial space, 700 apartments, 150 hotel rooms, seven kilometres of civic space and will cement the Parramatta CBD as a prominent office market in a national context.
UBS analyst Grant McCasker said to put this in perspective: Parramatta Square is about 33 per cent the size of Barangaroo South in Sydney.
"The higher-quality CBD will attract diverse tenants, driving capitalisation rate compression and rental growth. UWS is committed to stage 1, being 26,500 sq m of space on a 15-year lease, and the Commonwealth Bank is considering relocating from Sydney Olympic Park," Mr McCasker said.
But the positive demand was not enough to prevent an increase in vacancy rates in Parramatta's office market in the past six months, according to the Property Council.
The latest Office Market Report shows the vacancy rate rose from 6.3 per cent to 7.4 per cent in the six months to July 2015.
The PCA's NSW executive director, Glenn Byres, said Parramatta's office market has had positive demand, but it was outweighed by supply additions.
"New stock totaling 10,933 sq m entered the market in the past six months, withdrawals totalled 1117 sq m and there was 1283 sq m in net absorption," Mr Byres said.
Ben Lalic, leasing agent at Colliers International said, despite the higher vacancy rates, the Parramatta office leasing market is about to get a boost with several large deals signed in recent weeks.
He said the market has been particularly active in the second quarter of the calendar year, according to agents.
Tenants to leave the area include the NSW Police who have vacated 4300 sq m at 130 George Street, along with Theiss and the Department of Veterans' Affairs, who have together vacated 2000 sq m at 88 Phillip Street.
"The next round of office vacancy figures for Parramatta are probably going to paint a doom and gloom picture," said Mr Lalic said.
"In addition to several large organisations vacating the area, there has also been some stock re-introduced to the market following refurbishment, such as 1-3 Fitzwilliam Street.
"However, the real picture is quite the opposite as several large deals have been inked which will see the vacancy decline between now and the end of the year."
Recently, Colliers International has signed several large office leasing deals in Parramatta including: 5700 sq m to Parramatta City Council at 126 Church Street; 1800 sq m to Hanson at the Jesse Street Centre located at 2-12 Macquarie Street; and 1220 sq m to the Australian College of Nursing at 9 Wentworth Street.
