The suburbs have come alive as demand for office space heats due to the shrinking supply in capital cities, where developers have an increased appetite for residential conversions.
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Sales in the metropolitan markets, including the City fringes, have reached about $2.8 billion, with offshore investors buying about $2.63 billion and private investors about $1.15 billion.
The buyers are also lining up to take take advantage of the improving leasing market.
Internet search engine Google is one of the biggest tenants in suburban markets and is in the market for a new Sydney site, with 100 Harris Street, Pyrmont, Sydney said to have come on its radar. It is also looking at the Bays Precinct at Balmain for a larger, campus-style complex.
Expansion by the new technology tenants in central business districts and the use of space as restaurants and cafes, has also led to a drop in supply across capital cities, according to agents.
Atlassian is one of the front-runners for a tenancy at the Australia Technology Park in Redfern, Sydney, if developer Walker Corp wins the $200 million-plus site from UrbanGrowth NSW.
To cater for this wave of growth, retail landlord Scentre is looking at the possibility of building an office tower on top of, or near, its Westfield Parramatta shopping centre, while GPT Group and Stockland, among others, offer office space for rent across its suburban malls.
This caters for a range of users that are the make-up of suburban life, being self-employed people looking for an office for an hour to small to medium enterprise wanting part-time conference rooms.
Overseas developers looking to convert older suburban properties into apartments is also putting the squeeze on supply, leading to hikes in rent.
John Marasco, Colliers International managing director of capital markets & investment sales, said Metro office markets were witnessing this demand spill over into their suburban markets.
Although stock in CBD markets was increasingly hard to come by and highly competitive when listed, it was not just spillover demand targeting metro assets.
Mr Marasco said many investors were taking a deliberate approach to invest in our metropolitan markets, attracted by the higher yield, long-term development upside potential, as well as infrastructure improvements that were benefiting some markets.
"In Melbourne, Chinese buyers have been active in metropolitan markets, however they have all been private buyers. We expect that these buyers will continue to scour metropolitan markets for good quality assets, with long-term development upside a strong attraction," he said.
"Institutional buyers traditionally prefer the established metropolitan markets of Parramatta, North Sydney and St Leonards in Sydney, Fortitude Valley and West End in Brisbane, and St Kilda Road and Southbank in Melbourne."
