SUBURBAN office markets are outperforming the Sydney central business district as workers opt to be closer to home, and are prepared to pay for it.
Sales and leasing have been stronger in the past three months and are tipped to escalate with the end to uncertainty over the federal election result and companies happier to make decisions.
Two large sales that are expected to be finalised in coming weeks include the Sydney Water Board site at 1 Smith Street, Parramatta for about $175 million.
Asian and domestic investors are in the mix as potential bidders.
Another possible sale is the NSW Police headquarters in Parramatta, which could have a price tag of more than $240 million.
According to CBRE, North Sydney and Parramatta have experienced strong office rental growth, outperforming the Sydney CBD.
There was also the recent launch of stage three of the $1.6 billion Parramatta Square project. That stage incorporated two commercial towers, new municipal offices and a library.
CBRE's research shows Parramatta experienced 4.9 per cent year-on-year growth. Vacancy for Parramatta is 7.3 per cent, down 2.3 per cent from the previous quarter.
Rental incentives also remain at a much lower rate than in the CBD, at 20 per cent, reflecting steady tenant demand for space.
CBRE senior director of office services, Jenine Cranston, said CBD incentives were at an average of 30 per cent and may increase.
"While sublease remains a threat, the lack of new stock for the rest of this year, and into 2014, will be beneficial and should offset some of the impact of the soft tenant demand," she said.