CONVERSION of older-style commercial properties into much-needed residential projects is gaining momentum and areas such as Parramatta will be beneficiaries.
The explosion in leasing by government offices in the area has brought with it a rise in demand for retail and residential assets.
The same trend is occurring across southern Sydney, where developers find it's more lucrative to renovate an old warehouse or derelict office block into high-end and high-margin residential towers.
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In some scenarios, banks will lend to developers for apartment projects in which they can recoup cash back as each strata flat is sold.
If the bank loan is for the construction of commercial assets, developers are opting for mixed-use projects. They can add value with shops at ground level under the apartment blocks.
According to Jones Lang LaSalle's research, in the past 18 months eight mixed-use development sites sold in the Parramatta city centre, totalling about $68 million.
A number of large companies and government departments, including Deloitte, QBE, Sydney Water and NSW Police, moved to Parramatta recently, making it even more appealing for residential developers looking to service the influx of workers.
The director of sales and investments at Jones Lang LaSalle, Jeff Moxham, said Parramatta was a growth area. ''With major companies and government departments relocating to the Parramatta CBD, there has been an increase in the number of workers in the area,'' he said. ''As a result, demand for residential and mixed-use sites has been strong in the last 12 to 18 months and we expect that to continue.''
Recent Property Council of Australia data shows the overall vacancy rate for Parramatta offices is 9.6 per cent, with A-grade vacancies at 1.8 per cent. Up to 77 per cent of vacant stock is within C- and D-grade assets. It is these lower-graded buildings that are being targeted for redevelopment into upmarket residential projects.
The head of sales and investments for NSW at Jones Lang LaSalle, John Macree, said many private developers were looking at sleeper markets on the outskirts of Sydney.
''One of the key attractions of these areas, like Parramatta, is that there is existing infrastructure and services to draw upon,'' he said.
He said an added incentive for the area was the commitment of the NSW government to maintain the stamp duty exemptions for first-home buyers purchasing new or off-the-plan properties.
The director of sales and investments at Jones Lang LaSalle, Leslie Cheng, said these stamp duty exemptions would drive further demand for residential properties among first-home buyers.
''Parramatta is a key area for these buyers, as the average housing price is under the threshold,'' Mr Cheng said.
''This is attracting the private developers looking to capitalise on demand from first-home buyers.''
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