The Sydney office leasing market is showing signs of recovery as white-collar employment strengthens and new construction continues to shrink.
The current average office vacancy in Sydney is about 7 per cent. The new buildings at 1 Bligh Street and 163 Castlereagh Street and the yet to be erected 85 Castlereagh Street are principally pre-committed.
The latest agreements are by the Commonwealth Property Office Fund (CPA), which has entered deals with the Bendigo and Adelaide Bank and an existing tenant, investment house JPMorgan in the fund's key City buildings.
Under the contract, the bank has taken up 2453 square metres or two whole floors at the fund's 175 Pitt Street edifice on the corner of King Street.
Following its rivals and opening branches across the CBD, the bank has signed a five-year contract from January 1 next year.
This comes after Macquarie Bank's new lease contract at 130 Pitt Street and at No.1 Martin Place.
Property analysts at Goldman Sachs JBWere said the lease of 175 Pitt Street has been a challenge for CPA for some time. Therefore securing its first tenant at this property is a good sign.
According to them, the extension of the JPMorgan contract at 225 George Street provides CPA more than two years to find new tenants to refill the space.
The tenant enquiry has been reassuring at 175 Pitt Street and has now translated into the first executed lease, said John Dillon, the head of commercial and industrial operations at Colonial First State Global Asset Management, which is the external manager of the Commonwealth Property Office Fund.
''Given that leasing negotiations are ongoing on the balance of space in the building, and the obvious sensitivity of these negotiations, the achieved rent is unable to be disclosed at this time, but is within the budgeted scope of the leasing program for this asset,'' Mr Dillon said.