Norwest Property Market Update 2nd Half of 2021

Positioned approximately 30km north-west of Sydney, Norwest is an area which encapsulates the suburbs of Baulkham Hills, Rouse Hill, Castle Hill, Norwest, and Bella Vista. These suburbs are noted particularly for their commercial precincts, which include office and retail uses, as well as strata industrial properties.

The median commercial sale price in Norwest was $7,784 per sqm for Q2 2021. This represents half-yearly (Q4 2020 – Q2 2021) price softening of -19.9% and annual (Q2 2020 – Q2 2021) price softening of -7.1%. Working from home conditions and reductions in rent to accommodate losses in business revenue may be the root cause of this. The number of commercial sales has significantly increased in Q1 and Q2 2021, similar to that of Q1 and Q2 2020. This suggest a price recovery might be underway, dependent upon COVID-19 restrictions.

With only one recorded sale in Q2 2021, the price per sqm for industrial properties in Norwest was $3,754 per sqm. Industrial property sales in Norwest remain limited overall, with just 8 sales in Q1 2021 and 1 sale in Q2 2021. Despite there being considerable demand for large scale, prime industrial area in Sydney - driven by a trend toward online ordering - the Norwest area mainly contains smaller scale industrial property. Thus, there has not been the rush in demand that some might expect.

The median commercial net lease rate for Norwest in Q2 2021 was at $380 per sqm. This represents a half-yearly (Q4 2020 – Q2 2021) softening -4.5%, but stable annual (Q2 2020 – Q2 2021) price growth. Leasing activity has increased significantly, with 43 leases recorded in Q2 2021 (compared to 19 in Q2 2020). Despite a decline in net lease per sqm over the first quarter of 2021, demand for office space outside of the Sydney CBD has increased, as many businesses move their operations to outer areas to save costs and accommodate working from home conditions.

Norwest’s median industrial net lease rate was $210 per sqm as of Q2 2021. This represents a significant half-yearly (Q4 2020 – Q2 2021) price growth of 16.7%, but a -4.1% softening in annual (Q2 2020 – Q2 2021) price growth. However, the annual price softening is not entirely reflective of industrial pricing conditions, as net lease per sqm has recovered from an initial drop at the beginning of COVID-19. Leasing activity has improved since Q4 2020, with 13 leases recorded in Q2 2021, but is not yet comparable to leasing activity in early 2020.

Norwest is set to benefit from an estimated $7.2B of future project development, scheduled to commence between 2020-2022. There are 163 major projects commencing, which represents 92.3% of the original development pipeline, with approximately $604.7M (or 7.7%) either deferred or abandoned by developers.