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Digital disruptors and their impact on the Surry Hills and City Fringe retail property market

From a bygone era of rag-traders and red light establishments, Surry Hills has emerged as the site of a dynamic mix of commercial and residential buildings and together with the construction works of the Sydney Light Rail, a future mecca for innovative digital disruptors. The Surry Hills locality is generally home to creative tenants, boutique businesses and as headquarters for local/national companies. This is due to the proximity to the Sydney CBD, and slightly lower rental rates afforded by this location. In recent years, there has been significant gentrification in the Surry Hills and Redfern. The area is thriving with small to medium sized businesses involved in the IT and media industries with News Corporation and the Academy of Film Theatre and Television situated in Holt Street.

Retail properties that are well located and suitable for use in the highly competitive food and beverage sector are a rare commodity and keenly sought after area in Surry Hills. As the Sydney CBD is becoming increasingly unaffordable due to a lack of new office development, many smaller professional companies and IT start ups have relocated to fringe city locations such as Surry Hills.

The area has witnessed strong demand from the owner occupied and private company market as a result. The increase in office workers has bolstered retail trade with an increasing number of café and take away operators now catering to the weekday lunchtime trade.

There have been increasing levels of recent sales within the past 6-12 months within Surry Hills. We consider the area to be outperforming the general market with record capital values being recorded as demand is now outstripping supply.

Specific to well-located retail properties, there are a limited opportunities for both rental and purchasing. Properties with the benefit of a grease trap and exhaust system are also keenly sought after, as council approval and installation requirements are making these extremely cost prohibitive and more often than not, outright rejected.

Where purchasing opportunities become available, there are only typically short marketing periods levels as such premises also appeal to owner-operators and passive investors.

This is evidenced by the strong level of transactions over the past several years, as properties are generally tightly held, and that existing users usually expand their operations by acquiring more space.

As a result, we consider that the buyers of properties in the area appeal to both owner occupiers and investors alike.

In conclusion, we have witnessed over the past 6-12 months, commercial sales activity and yields have firming within Surry Hills and the city fringe markets . There are noticeable rising price levels as investors shift from residential holdings to commercial and retail investments. It is now normal for only a short selling period of up to 3-6 months for retail properties.

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