Demand for office space across the Sydney city and out to the fringe suburbs is close to the highest levels for many years, boosted by new developments, withdrawals from residential conversions and rail infrastructure and rising employment.
Job advertisements rose to six-year highs, up by 0.4 per cent in May and up 7.5 per cent on a year ago.
CommSec senior economist Savanth Sebastian said the job market is in reasonable shape.
"Employers continue to seek staff, with the number of job ads up over 7 per cent on a year ago. The data lines up with the job vacancies figures from the Bureau of Statistics, which also stands at six-year highs," Mr Sebastian said.
"The monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around five to six months for the new staff to be added to the payrolls."
According to JLL, the vacancy rate in the Sydney fringe is the lowest in Australia at 3.3 per cent in the first quarter of calendar 2017, steadily falling since a peak in the previous corresponding period.
JLL tracks about 928,500 square meters of office stock in the Sydney Fringe, across 13 suburbs surrounding the Sydney CBD.
The majority of leasing activity is concentrated in the sub-1000sq m cohort of the market, as there are few contiguous space options available.
The Sydney Fringe is predominantly composed of occupants from the technology firms, professional services, and media industry sectors.
JLL head of office leasing Daniel Kernaghan said small to medium-sized firms are attracted to the Sydney fringe because of the creative space offerings in suburbs such as Surry Hills or Pyrmont.
"The market offers an attractive value proposition, as average rents in the Fringe are cheaper than Sydney CBD. Yet fringe occupants are also able to maintain close proximity to their CBD-based clients and be an attractive destination for highly-skilled employees," Mr Kernaghan said.
JLL's head of research Australia, Andrew Ballantyne, said: "The tight market conditions will remain a feature of the Sydney fringe over the next three years. Technology, education and small and medium-sized enterprises [SMEs] are growth sectors of the NSW economy and are, historically, occupiers of the fringe.
"The development pipeline is constrained with only three developments currently under construction totalling 99,400sq m. The largest of these developments is the 93,000sq m Commonwealth Bank of Australia Campus in the Australian Technology Park [ATP], Eveleigh. The site is 100 per cent pre-committed to the Commonwealth Bank and involves relocation from other markets."
In the City, leasing and development activity continues unabated. One of the latest deal is by law firm Baker & Mackenzie, which is vacating 50 Bridge Street for new digs at Barangaroo. Sydney's CBD prime vacancy is about 7 per cent, but falling, according to agents
According to the managing director office & industrial at AMP Capital, Luke Briscoe, following the success of the residential sales campaign for Loftus Lane apartments and securing AMP as anchor tenant for Quay Quarter Tower (QQT), AMP Capital can confirm the construction of the $1 billion-plus office tower and residential apartments will begin in early 2018.
"We are seeing strong demand from prospective customers for a prime office space in a great location which QQT offers," Mr Briscoe said.
"We know though, that it's not just about what a building looks like or where it is located. Our customers are also looking for a mix of amenities, building efficiency and flexibility and importantly a long term partnership with their landlord that supports them and helps their business succeed. AMP Capital can offer all of this as part of this development.
"We are confident with the product we're developing and with the level of enquiry we're receiving for QQT. Our prospective customers are not only focussed on the office accommodation, but also the retail amenity across the Quay Quarter Sydney precinct, which will span some 6000sq m, as this is a key differentiator in their focus on talent recruitment."