Proving that growth and jobs, the mantra of the Federal Government, are happening in western Sydney, is Parramatta’s office vacancy rate, which at 5.6 per cent is one of the lowest in the country.

It comes as offices are converted into residential and older buildings are being sold to new investors with plans for bigger, brighter towers.

The vacancy rate is down from 7.4 per cent in July 2015 and the prime vacancy rate is even lower, tightening to just 1.7 per cent, the lowest prime vacancy rate across all Australian office markets. The reduced vacancy can be attributed to the absence of supply and the wait for new developments to be completed.

According to the latest Knight Frank Parramatta office market brief, Parramatta’s extremely low prime vacancy rates remain trending below the 10-year average of 3.1 per cent.

“While some tenant displacements stemming from change of use withdrawals resulted in modest negative net absorption in 2014, the result is now positive in 2015,” the report says.

One of the biggest tenants is Western Sydney University which has pre-committed to the entire 1 Parramatta Square (1PSQ) development as sole tenant, while the NSW Department of Education has recently announced it will be pre-committing to the entire 105 Phillip St development, with 1,800 staff relocating from Sydney CBD.

Another new site is the former Cumberland Newspapers headquarters, located at 142 Macquarie Street, Parramatta, which has been designed by PTW Architects, in association with Collins and Turner and landscape architects McGregor Coxall.

The developer is Dyldam​ and the property sits at the edge of the CBD, is close to both the Parramatta River and surrounded by several significant heritage sites.

The design features three mixed-use towers, a 60-storey residential tower along with an additional 35 level and a 25 level building.

Even with the new developments, vacancy rates are expected to remain relatively tight over the next two years.

Matt Whitby, Knight Frank’s group director head of research and consultancy, said leasing activity in the prime market is restricted by a lack of vacant space, with stock levels for large prime spaces (750 square metres-plus) being very limited, except for pre-lease space available in the Parramatta Square development.

He said HSBC at 10 Smith St is renewing its lease at its current premises, probably due to the severe under supply of prime spaces available in the market.

“The limited availability of prime grade office stock has driven tenants to secondary grade space to satisfy their tenancy needs. As such, refurbished secondary assets justify strong rental growth, and these refurbished spaces are a key requirement for many large tenants,” Mr Whitby said.

“Secondary net face rents currently average $350 per sqm per annum, a strong annual increase of 4.5 per cent. Secondary incentives continue to remain stable at 20-25 per cent net, however moderate downward pressure is expected over the next two years.”

In order to supplement the strong population growth in Western Sydney, office withdrawals are expected to pick-up further over the next few years, with 14-20 Parkes St on the market for sale (an example of this growing trend), which is an office site proposed for residential, mixed-use conversion.

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