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- Rhodes is a modest scale suburban office hub offering circa 150,000 sq.m. of commercial net lettable area. Most office accommodation has been developed over the past 15 years and is primarily of a suburban “A” grade standard. The majority of office space is located to the south of the subject property within Rhodes Corporate Park (60%) and additionally within contemporary office developments along Rider Boulevard adjacent to (and within) Rhodes Waterside shopping centre in Rhodes West. There have been minimal new stock additions to Rhodes in recent years. - It appears that the primary reason for the proposed zoning amendment to the subject property is due to new employment targets released by the Greater Sydney Commission subsequent to the initial September 2017 Rhodes East Priority Precinct Investigation Area Planning Report. Accordingly, there is a target for creating 1,200 new jobs within Rhodes East by 2036. The subject property has been earmarked to accommodate the majority of the job targets by Government within a standalone office featuring a GFA of circa 40,000 sq.m. A high rise development would be required to house such a considerable content of office space on the subject property. - Contemporary “A” grade office buildings throughout Rhodes feature NLAs ranging on average between 12,000 – 17,000 sq.m. Rhodes Corporate Park collectively accommodates circa 90,000 sq.m. of NLA however this is held within six buildings (averaging approximately 15,000 sq.m. per building). At least 36,000 sq.m. of office NLA (40,000 sq.m. GFA) is mooted for the subject property under the revised precinct plan. This represents approximately one quarter of current office supply in Rhodes and a NLA more than double the size of many current buildings. New development proposals in the major centres of Macquarie Park and Parramatta feature average respective building sizes of 27,500 sq.m. and 36,000 sq.m. being less than or similar to the proposal for the subject property. Given the vastly superior nature and scale of these locations, the large building scale proposed for the subject property is unlikely to be supportable from a financial feasibility perspective given its location within a non-core commercial hub. - The majority of new office development proposed throughout the broader suburban region is located in the major city centre office precincts of Macquarie Park and Parramatta. This is due to an ongoing undersupply and pent up demand in these markets (evidenced by strong take-up and low vacancy rates), uplifts in planning controls facilitating superior development outcomes (particularly in Parramatta), a preference from particularly large scale corporate and government tenants to be located within these key centres, financial feasibility considerations, superior accessibility based on current and future public transport infrastructure, site availability and retail /lifestyle amenity offered in these major precincts. Although there are land limitations in Rhodes, the area enjoys few of the same marketable features as these core precincts. - The majority of new development proposed in the nearby centres of Sydney Olympic Park and Macquarie Park will be in the form of low to medium rise campus style office buildings featuring large scale floorplates of between 2,000 – 3,000 sq.m. It is this scale / configuration that is most sought after in the market (particularly by corporate entities) and remains a focus for developers. Our understanding is that based on the size and configuration of the subject property, much smaller floorplates of up to 1,500 sq.m. can be accommodated and a high rise structure would be required. As such, provision of floorplates this size would considerably limit demand, rental potential and add substantially to construction cost compared with a typical lower rise campus style building offering a similar floor area. - From a market standpoint it is not considered commercially appropriate to accommodate all proposed commercial office space within one property given the proposed scale far exceeds all other office space throughout the area and user profiles / requirements. A more practical and sound approach would be to locate appropriate scale office accommodation over multiple sites or on sites capable of supporting campus style office buildings with large floorplates as is most sought in the market. The main opportunity with regards to the latter is the Hewlett Packard site at 410 Concord Road which has the scale to support a campus style facility similar in context to Rhodes Corporate Centre. In addition there may be potential to accommodate more market appropriate size and scale office development north of the subject where there is greater width between Concord Road and Blaxland Road. - There is considered additional opportunity to provide office development on additional sites in close proximity to the station. Most appropriately this could include a logical northern extension of the offices located at 3 and 5 Rider Boulevard on the land at 2 – 34 Walker Street. This land forms part of the revised Rhodes East Precinct and is considered very well suited to accommodate appropriate scale office buildings. Such developments could potentially form part of mixed use developments and would reduce the burden of a single site needing to provide an uncharacteristically large office development in isolation.

- With specific regard to the subject property, there are potential limitations to staging an office development on the property given the relatively modest size and elongated configuration of the site for such a considerable scale development. As such, subject to a massing exercise and architect / design review, the development would most likely need to be undertaken in a single stage. Given funding requirements from lenders for pre-commitments (and potential difficulties in obtaining finance should pre-commitments not be obtained), the large scale of the project high-rise configuration, the considerable financial outlay to construct a high-rise suburban office building (typically circa 30 - 40% premium over more typical low rise campus style developments) plus the location within a non-core office precinct, the financial feasibility of such a project is considered to be in question. - From a broader context, there is considered ample capacity to achieve the 2036 proposed employment targets which have been established for the entire Rhodes peninsula (along with the 1,200 jobs within Rhodes East). In addition to providing jobs within a proposed facility on the subject property, this is based on identified employment opportunities in the area, including the expansion of Concord Hospital, future employment at the Rhodes Corporate Park and future redevelopment of the Hewlett Packard site. In addition to this, other employment generating opportunities will be in the form of a new school, retail and alternate commercial opportunities. - Based on the additional opportunities to achieve job targets in the area and with consideration to market factors, a 40,000 sq.m. high rise office building with floorplates of circa 1,500 sq.m. is not considered viable for the subject property in Rhodes. Any development of this size is considered too large for a suburban office hub and would offer extensive new supply with very limited demand based on configuration with small floorplates and low parking provision. As such, financial feasibility of a project with these characteristics would be in question.

1. Instructions...... 1 2. Subject Property Location & Context...... 2 2.1 Subject Property ...... 2 2.2 Location ...... 3 2.3 Surrounding Development ...... 4 2.4 Transport Infrastructure ...... 5 3. Employment Analysis...... 7 3.1 Introduction ...... 7 3.2 Employment and Labour Force ...... 7 3.3 Industry of Employment ...... 9 3.4 Employment & Journey to Work in Rhodes / City of Canada Bay ...... 11 3.5 Employment Targets ...... 13 4. Current Office Supply...... 15 4.1 Introduction ...... 15 4.2 Rhodes ...... 15 4.3 Sydney Olympic Park ...... 17 4.4 Macquarie Park ...... 17 4.5 Parramatta ...... 18 4.6 Local Centres ...... 19 5. Vacancy Rate Review...... 20 5.1 Vacancy Rate Review ...... 20 6. Development Pipeline...... 22 6.1 Future Supply Pipeline ...... 22 6.2 Future Supply Chart ...... 24 7. Office Market Snapshot – Price Points & Key Fundamentals...... 25 7.1 Key Market Metrics ...... 25 7.2 Market Transaction Summary ...... 25 7.3 Commercial Office Leasing Summary ...... 26 8. Strategic Government Policy Review...... 27 8.1 Introduction ...... 27 8.2 Rhodes Revised Draft Precinct Plan ...... 27 8.3 Additional Planning Strategies ...... 29 9. Market Positioning & Demand Conclusions...... 31

Ecove 1 Australia Avenue Sydney Olympic Park NSW 2127 (Greg Hynd) Telephone +61 (0) 2 9673 0444 Email [email protected]

Charter Keck Cramer (“Charter”) has been appointed by Ecove to prepare an Office Market Analysis of the Rhodes precinct.

Ecove is proprietor of a grouping of properties within Rhodes East collectively identified as the “subject property” which based on recent revisions to Rhodes Draft Precinct Plan has been designated with a proposed B3- Commercial Core zoning classification. This zoning restricts land uses to primarily office related. Within the initial Draft Precinct Plan the site had been proposed as a mixed use site. It is noted that the subject property is the only site within the Rhodes Precinct Plan area to be designated with a commercial zoning.

As such the purpose of this office market analysis is to clearly understand the potential demand for office space in Rhodes including an analysis of the type and scale of office being sought in the market.

Charter’s review has included the following:

- Overview of Rhodes and description of the subject property. - Employment analysis. - Analysis of current office supply in Rhodes and competing markets. - Commentary in relation to potential stock withdrawals. - Historic absorption rates of new office supply. - Vacancy rate review of suburban office markets - Development pipeline. - Office market rental price point snapshot and review of key fundamentals. - Overview of strategic Government Policies relative to Rhodes and identified future office supply requirements. - Market positioning and demand conclusions.

This report has been prepared for the exclusive use of the party to whom it is addressed and for no other purpose. No responsibility is accepted for any third party who may use or rely on the whole or any part of the content of this report. It should be noted that any subsequent amendments or changes in any form to this report would only be notified to and known by the parties to whom it is addressed. This report has been carefully prepared by Charter Keck Cramer Strategic Research and the information contained herein should not be relied upon to replace professional advice on specific matters. © 2019 (Charter Keck Cramer)

Charter Contact Brendan Woolley Report Author Brendan Woolley

Rhodes Office Market Analysis PAGE 1

The subject property is of an irregular shape, comprising seven adjoining allotments (one of which accommodates a strata complex) which feature a combined land area of approximately 5,586 sq.m.

The property is advised to include the following parcels:

Subject Property Title & Land Details

Address Title Details Indicative Land Area (sq.m.) 15 – 17 Blaxland Road, Rhodes Lot 1 DP833959 1,978 25 Blaxland Road, Rhodes Lots 1 to 8 SP71065 1,079 27 Blaxland Road, Rhodes Lot F DP411859 734 440 Concord Road, Rhodes Lots C, D & E DP411859 1,302 442 Concord Road, Rhodes Lot C DP432340 493 Total 5,586

The property is improved with a low rise commercial structure within the southern section, a four storey residential apartment building within the mid-section, a fire station to the north and 2 x detached dwellings within the northern component.

It is proposed under the Rhodes Revised Draft Precinct Plan, issued by the NSW Department of Planning and Environment in December 2018, that the subject property be rezoned B3- Commercial Core to provide employment floorspace adjacent to Rhodes train station in standalone commercial buildings. It is noted that the subject property is the only site in Rhodes East proposed to be rezoned for B3 – Commercial Core purposes. The Draft Precinct Plan indicates that up to 1,200 new jobs be provided by 2036 in the Rhodes East precinct with the subject property identified as a key site to accommodate a high quantum of new employment opportunities. The Greater Sydney Commission has identified an employment target of 6,300 to 8,300 new jobs by 2036 in Rhodes.

The Draft Precinct Plan states a minimum requirement of 40,000 sq.m. of commercial GFA be provided which is anticipated to be fully accommodated on the subject site. After an allowance for building efficiencies and circulation this could translate to a minimum net lettable area (“NLA”) of approximately 36,000 sq.m. It is understood that based on the site area and configuration that maximum floorplates of 1,500 sq.m. could be accommodated.

Figure 1: Aerial Photograph of the Subject Property

SOURCE - Charter Keck Cramer; Six Maps

Rhodes Office Market Analysis PAGE 2

Figure 2: Subject Property Photographs

Blaxland Street Frontage (Southern Section) Blaxland Street Frontage (Northern Section)

Concord Road Frontage (Southern Section) Concord Road Frontage (Northern Section) SOURCE - Charter Keck Cramer

The subject property is positioned off the western side of Concord Road, north of its intersection with Blaxland Road (also known as Mary Street East) in Rhodes. The property also fronts the eastern side of Blaxland Road which provides primary street access to most properties (as currently configured).

The property is located within the eastern component of Rhodes which as per strategic planning documentation is as the “Station Gateway East” character area. Much of the eastern component retains its early character featuring low scale commercial and retail premises adjacent to Rhodes railway station, well established low density residential dwellings to the north and light industrial development within the northern section of the peninsula which extends to the Parramatta River foreshore.

The western section of Rhodes has been extensively redeveloped over the past 20 years into a primarily high density residential location featuring modern apartment buildings and mixed use commercial and retail premises.

The eastern and western components of Rhodes are geographically divided by the Northern Line railway which runs in a north to south direction linking with Strathfield to the south and Hornsby to the north. In addition the subject property is located off the western side of Concord Road which is an arterial roadway linking with the M4 Motorway to the south and Victoria Road to the north. Accordingly the property is “wedged” between these transport links

Nearby business park and commercial centres include Sydney Olympic Park (3 kilometres south-west), Macquarie Park (7 kilometres north-east) and Parramatta CBD (10 kilometres west). The Sydney CBD is located approximately 16 kilometres east with access available via the road and rail.

Rhodes Office Market Analysis PAGE 3

Figure 3: Location Map of the Subject Property

SOURCE - Charter Keck Cramer; Six Maps

The subject property is set amongst a mix of development most of which is well established. A standalone four storey office building is located adjacent to the south, Rhodes Train Station is opposite to the immediate west, McIlwaine Park (public reserve) is opposite to the immediate east and predominantly low density freestanding residential development is to the north. Light industrial premises are located beyond the low density residential dwellings and a Rhodes Corporate Park is located off the southern side of Mary Street East being positioned between the rail lines and Concord Road (which transitions into Homebush Bay Drive at this point). Rhodes Corporate Park accommodates the majority of office accommodation in Rhodes within seven buildings.

A limited content of additional office accommodation is located off the western side of the rail lines along Rider Boulevard. Also located along Rider Boulevard is Rhodes Waterside shopping centre which in addition to retail accommodation features a content of office space. Rhodes Corporate Park and Rhodes Waterside are linked via a pedestrian bridge over the rail lines.

Limited new development has been undertaken within Rhodes East however a significant content of primarily high rise residential has been developed in Rhodes West.

Figure 4: Surrounding Development

Neighbouring Office Building Adjacent to the South Rhodes Train Station Opposite to the West

Rhodes Office Market Analysis PAGE 4

McIlwaine Park opposite to the East Examples of High Rise Residential Development in Rhodes West SOURCE - Charter Keck Cramer

Rhodes is relatively well serviced by transport infrastructure and the subject property is considered to have good transport amenity being located along an arterial roadway (Concord Road) and opposite Rhodes Train station. Travel time to the Sydney CBD via rail is within 30 minutes.

The “Rhodes East Priority Precinct Investigation Area” planning report released in September 2017 states the following:

“Over the past 10 years, rail patronage at Rhodes Station has experienced significant growth as the Peninsula has been redeveloped. This has meant that both AM and PM peak rail services achieved their loading capacity in 2015.”

The report also notes the following:

“The T1 Northern Line also provides freight services outside of peak hours and is part of Australia’s busiest freight rail line, the east coast rail network (serving Melbourne, Sydney and Brisbane).”

In addition to rail, public bus services also operate through Rhodes. These services include the M41 Metrobus (Macquarie Park to Hurstville), 458 (Ryde to Burwood), 459 (Macquarie University to Strathfield), 526 (Sydney Olympic Park to Burwood) and 533 (Sydney Olympic Park to Chatswood).

Concord Road is the primary roadway providing access to Rhodes. The “Rhodes East Priority Precinct Investigation Area” planning report states the following in relation to Concord Road:

“Concord Road is the primary north-south road and freight route that forms part of the A3 corridor linking the Northern beaches, Pymble, Macquarie Park, Ryde, Sydney Olympic Park and Hurstville as well as the M2, M4 and M5 Motorways.”

“ Concord Road is subject to high volumes for private freight vehicles, freight and public transport, and is currently operating close to capacity.”

“….there are limited opportunities to provide additional capacity on the existing road network….particularly on Concord Road, without significant or substantial improvements or interventions that do not address the vision and objectives for Rhodes East.”

A pedestrian and cycle network is in place throughout the eastern section of Rhodes including routes along the eastern foreshore of Homebush Bay, between John Whitton Bridge & Rhodes station, and along the eastern side of Ryde Bridge.

The NSW Government has committed to deliver a new Parramatta River ferry wharf at Rhodes which is the only new significant infrastructure proposed in the area. The final location is yet to be determined but it is anticipated the wharf will be positioned within northern edge of Rhodes East.

Upgrade options are being explored for Rhodes train station which include extension of the platform and new northern entrances east and west of the railway line.

Rhodes Office Market Analysis PAGE 5

The only other upgrades proposed for the area are in the form of active transport. That is, there are proposed initiatives to encourage a sustainable and walkable neighbourhood with a street hierarchy and layout which maximises walking, cycling and public transport patronage. This will include dedicated cycle lanes and connected paths and corridors.

Throughout the broader region the following major infrastructure is proposed which will provide additional nearby transport options for residents in both Rhodes and suburban locations:

- Sydney Metro West – Announced by the NSW State Government in August 2016, the Sydney Metro West project is a proposed underground metro railway which will connect Parramatta with the Sydney CBD. The project aims to double current rail capacity of the existing rail network and in terms of potential benefits to Rhodes will feature a new station at Sydney Olympic Park and link with the T1 Northern Line. The project is not anticipated to be completed until the late 2020s - Parramatta Light Rail – a two stage light rail project to be developed with Stage 1 connecting Westmead to Carlingford via the Parramatta CBD (proposed completion 2023) and Stage 2 connecting Parramatta CBD to Sydney Olympic Park. The Light Rail is intended to link with Sydney Metro West to enable intermodal commuting.

The major road infrastructure project being developed in the region is Westconnex. Construction of Westconnex began in March 2015 with full completion anticipated in 2024. The project includes the following:

- Widening of the M4 Motorway from Parramatta to Homebush (complete). - Extension of the M4 Motorway by 6.5km of tunnels between Homebush and Haberfield (under construction). - Duplicating the M5 East Motorway with 9km of tunnels from King Georges Road Interchange at Beverly Hills to a new interchange at St Peters (under construction). - M4 and M5 link tunnels (under construction). - A new M4 – M5 Link Rozelle Interchange and Iron Cove Link (under construction).

Rhodes Office Market Analysis PAGE 6

To understand the employment profile and trends within the Rhodes area, we provide the following data, together with our corresponding analysis and commentary.

The suburb of Rhodes is located within the Concord West – North Strathfield SA2 (Statistical Area 2) region. For the purposes of comparison, we have compared the SA2 with the Canada Bay SA3 council area and Greater Sydney. Some data is only available / relevant to be analysed at a higher statistical level (such as unemployment and labour force) which has been analysed at a SA4 level.

The following maps indicate the geographic location and extent of the SA2, SA3 and SA4 levels.

Figure 5: Statistical Areas Reviewed

Concord West – North Strathfield (SA2) Canada Bay (SA3)

Sydney – Inner West (SA4) SOURCE – Australian Bureau of Statistics, Charter Keck Cramer

The following analysis is provided with respect to residents employed within the Sydney – Inner West SA4 region on a moving annual total (“MAT”) basis.

Rhodes Office Market Analysis PAGE 7

Figure 6: Employment & Labour Force SA4 Region

Unemployment Rate (MAT*) 7 Greater Sydney Sydney - Inner West (SA4) 6

5

4

3

Unemployment Unemployment (%) Rate 2

1

0

Labour Force (MAT*) 3,100 200 Greater Sydney Sydney - Inner West (SA4) 190 2,900 180 2,700 170 160 2,500 150 2,300 140

2,100 130 120 1,900

110 Inner West Labour Force ('000s) Greater Sydney LabourForce ('000s)

1,700 100

Sep-1999 Sep-2000 Sep-2002 Sep-2003 Sep-2005 Sep-2006 Sep-2008 Sep-2009 Sep-2011 Sep-2012 Sep-2015 Sep-2018 Sep-2001 Sep-2004 Sep-2007 Sep-2010 Sep-2013 Sep-2014 Sep-2016 Sep-2017

Labour Force Partcipation Rate (MAT*) 76.0 Greater Sydney Sydney - Inner West (SA4) 74.0

72.0

70.0

68.0

66.0

64.0

62.0 Labour Force Participation(%) Rate

60.0

Sep-2000 Sep-2001 Sep-2003 Sep-2004 Sep-2006 Sep-2007 Sep-2009 Sep-2010 Sep-2012 Sep-2013 Sep-2015 Sep-2016 Sep-2017 Sep-2018 Sep-2002 Sep-2005 Sep-2008 Sep-2011 Sep-2014 Sep-1999

SOURCE – Australian Bureau of Statistics, Charter Keck Cramer

Rhodes Office Market Analysis PAGE 8

The following observations are provided:

- The unemployment rate for the Sydney – Inner West SA4 region was 1.8% in November 2018, well below the rate of 3.5% for Greater Sydney. Historically the unemployment rate for the region has trended below Greater Sydney which is considered attributable to its central location in close proximity to the Sydney CBD. - The labour force aims to measure the number of those who are of working age population. This is defined as the number of residents who are aged 15 – 64. As at November 2018 the Sydney – Inner West SA4 region recorded a labour force of approximately 182,400 persons growing from 152,500 persons within the 10 year period subsequent to November 2008. This represents an annual average growth rate of 1.97% which is less than Greater Sydney at 2.32%. - The labour force participation rate measures the proportion of those who are actively working against the total population over the age of 15. The participation rate in the SA4 study area has in general trended above Greater Sydney with the local area exceeding 70% in recent years whilst Greater Sydney has ranged between 66% - 68%.

The following chart shows the industry sectors of employment within the Concord West – North Strathfield SA2. The data is sourced from the Australia Bureau of Statistics as per the 2016 census.

Figure 7: Industry Sector by Employment

Industry of Employment

Health Care and Social Assistance Financial and Insurance Services Manufacturing Professional, Scientific and Technical Services Wholesale Trade Retail Trade Accommodation and Food Services Construction Transport, Postal and Warehousing Education and Training Information Media and Telecommunications Administrative and Support Services Rental, Hiring and Real Estate Services Electricity, Gas, Water and Waste Services Public Administration and Safety Arts and Recreation Services Mining Agriculture, Forestry and Fishing

0% 5% 10% 15% 20% 25%

Concord West (SA2) Canada Bay Greater Sydney

SOURCE – Australian Bureau of Statistics, Charter Keck Cramer

The following observations are provided:

- The top five industry sectors in the Concord West SA2 Region are Health Care and Social Assistance (20.4%), Financial and Insurance Services (19.6%), Manufacturing (9.7%), Professional, Scientific and Technical Services (8.7%) and Wholesale Trade (8.4%).

Rhodes Office Market Analysis PAGE 9

- Health Care and Social Assistance (20.4%) along with Financial and Insurance Services (19.6%) are the top two industries in Canada Bay with the remainder of the top five industries including Professional, Scientific and Technical Services (9.7%), Retail Trade (9.6%) and Accommodation and Food Services (8.3%). - The top five industry sectors in Greater Sydney are Health Care and Social Assistance (12.8%), Professional, Scientific and Technical Services (11.0%), Retail Trade (10.4%), Education and Training (9.0%) and Construction (7.5%). - A total of 40% of all jobs within the Concord West – North Strathfield SA2 region are in Health Care and Social Assistance plus Financial and Insurance Services. These industries are prevalent due to the location of Concord Hospital and office accommodation in Rhodes.

The following chart shows the occupation of employment within the Concord West – North Strathfield SA2.

Figure 8: Occupation of Employment

Occupation of Employment

Professionals

Clerical and Administrative Workers

Managers

Technicians and Trades Workers

Sales Workers

Community and Personal Service Workers

Labourers

Machinery Operators and Drivers

0% 5% 10% 15% 20% 25% 30% 35% 40%

Concord West (SA2) Canada Bay Greater Sydney

SOURCE – Australian Bureau of Statistics, Charter Keck Cramer

The following observations are provided:

- White collar jobs are prevalent in the SA2 study area given the prevalence of medical and office related industry. As such, Professionals account for 33.8% of employment occupations, Clerical & Administrative Workers 21.9%, Managers 16.3% and Technicians and Trades Workers 7.6%. - Professionals and Clerical & Administrative Workers also represent the highest percentage of occupations in Canada Bay (29.3% and 18.3%) and Greater Sydney (27.5% and 15.3%)

Rhodes Office Market Analysis PAGE 10

The following table identifies the top employment precincts within the Inner West SA4.

Top Employment Areas in Inner West SA4

SA2 Area Employed Persons % Main Industry Concord West - North Strathfield 19,800 18.5% Health Care and Social Assistance Burwood - Croydon 13,300 12.4% Retail Trade Homebush 10,800 10.1% Retail Trade Leichhardt - Annandale 10,400 9.7% Retail Trade Ashfield 7,800 7.3% Public Administration and Safety Strathfield 7,700 7.2% Education and Training Lilyfield - Rozelle 5,800 5.4% Health Care and Social Assistance Five Dock - Abbotsford 5,400 5.0% Health Care and Social Assistance Balmain 5,000 4.7% Health Care and Social Assistance Concord - Mortlake - Cabarita 4,100 3.8% Health Care and Social Assistance Drummoyne - Rodd Point 4,100 3.8% Retail Trade Haberfield - Summer Hill 3,400 3.2% Health Care and Social Assistance Croydon Park - Enfield 2,800 2.6% Health Care and Social Assistance Strathfield South 2,700 2.5% Transport, Postal and Warehousing Dulwich Hill - Lewisham 2,600 2.4% Health Care and Social Assistance Canterbury (North) - Ashbury 1,600 1.5% Construction Inner West SA4 107,300 100% Health Care and Social Assistance SOURCE – Australian Bureau of Statistics, Charter Keck Cramer

Of the 107,300 jobs within the Inner West SA4 as at 2016, 19,800 (18.5%) were located within the Concord West – Strathfield region. Health Care and Social Assistance was the main industry type which is likely associated primarily with Concord Hospital and related health businesses co-located throughout the precinct.

It is anticipated that job numbers in Health Care and Social Assistance will increase due to the proposed expansion of Concord Hospital and health industry expansion.

To assist in further understanding employment profiles in the City of Canada Bay council area a “journey to work” review has been completed. That is, Canada Bay residents’ place of employment has been analysed and the place of residence of those working in the area has been examined. Journey to work data assists in identifying travel patterns and distances of daily commutes. The analysis is based on data from the 2016 ABS Census.

As at 2016, there were 44,684 employed residents in the City of Canada Bay. Of this, 8,083 lived and worked in the area with 35,175 living in the area but working outside and the remaining 1,430 people with no fixed place of work.

The table below lists the top eight council areas where those residing in Canada Bay council area are employed.

Canada Bay SA3 Residents Place of Work

Council Area (SA3 Region) Number of Residents Proportion of Residents (%) Sydney 13,299 29.8 Canada Bay 8,083 18.1 Inner West 2,830 6.3 Parramatta 2,811 6.3 Ryde 2,439 5.5 North Sydney 1,601 3.6 Burwood 1,246 2.8 Cumberland 1,137 2.5 SOURCE - Charter Keck Cramer; .ABS; idcommunity

Almost 30% of Canada Bay residents are employed in the City of Sydney Council area. This is most likely attributable to the relative close proximity to Sydney from Canada Bay with public transport commute times of less than 30 minutes. IN addition there is a high content of professionals living in Canada Bay which co-aligns with white collar employment particularly in the Sydney CBD.

Rhodes Office Market Analysis PAGE 11

Over 18% of residents are employed within Canada Bay with a relatively even spread of residents working in the surrounding council areas of Inner West (6.3%), Parramatta (6.3%) and Ryde (5,5%). Most remaining residents are also employed in nearby locations however within smaller employment hubs such as Burwood and Cumberland. The geographic spread is highlighted in the below map.

Figure 9: Canada Bay SA3 Residents Place of Work

Parramatta Ryde 2,811 (6.3%) 2,439 (5.5%)

Rhodes

Inner West Sydney 2,830 (6.3%) 13,299 (29.8%)

SOURCE - Charter Keck Cramer; .ABS; idcommunity

It is evident from the above map that a high proportion of Canada Bay residents choose to work in close proximity to their place of residence.

As at 2016, there were 33,537 workers employed in the City of Canada Bay. Of this, 8,083 lived and worked in the area with the remaining 25,454 people working in the area but living outside.

The table below lists the top eight council areas where those working in Canada Bay council area reside.

Place of Residence of Canada Bay SA3 Workers

Council Area (SA3 Region) Number of Workers Proportion of Workers (%) Canada Bay 8,083 24.1 Parramatta 2,406 7.2 Canterbury-Bankstown 2,351 7.0 Inner West 2,144 6.4 Ryde 1,954 5.8 Blacktown 1,883 5.6 Cumberland 1,809 5.4 Sydney 1,022 3.0 SOURCE - Charter Keck Cramer; .ABS; idcommunity

Close to a quarter of those who work in Canada Bay live in the area. A high content of the remaining workers are spread relatively uniformly throughout surrounding council areas including Parramatta (7.2%), Canterbury-Bankstown (7.0%), Inner West (6.4%), Ryde (5.8%, Blacktown (5.6%) and Cumberland (5.4%).

Rhodes Office Market Analysis PAGE 12

The geographic spread is highlighted in the below map.

Figure 10: Place of Residence (Origin) of Canada Bay SA3 Workers

Blacktown: 1,883 (5.6%) Rhodes

Parramatta: Ryde 2,406 (7.2%) 1,954 (5.8%)

Cumberland 1,809 (5.4%)

Inner West 2,144 (6.4%) Cumberland 2,351 (7.0%)

SOURCE - Charter Keck Cramer; .ABS; idcommunity

Somewhat in contrast to Canada Bay residents’ place of employment, those working in Canada Bay appear more willing to travel greater distances from their place of residence with a higher content commuting from more distant locations in the north west, west and southern suburbs of Sydney.

As per the Eastern City District Plan (March 2018), the delivery of between 6,300 and 8,300 new jobs in the Rhodes peninsula is a key focus for 2036. As a subset of this target, an additional 1,200 jobs are required by 2036 in Rhodes East under the Rhodes Revised Draft Precinct Plan (December 2018).

Although there is limited capacity for new development in Rhodes given finite land supplies, a number of employment opportunities have been identified in the area, including the expansion of Concord Hospital, future employment at the Rhodes Corporate Park and future redevelopment of the Hewlett Packard site south of Rhodes Station. Combined with development of the subject property and other opportunities presented within the Rhodes Revised Draft Precinct Plan there is considered ample opportunity to not only meet but exceed the proposed employment targets. This is highlighted in the table overleaf.

Rhodes Office Market Analysis PAGE 13

Employment Target Review

Location Description Potential Jobs Generated Subject Property Assumes 40,000 sq.m. GFA as per revised Precinct 3,600* Plan (approx. 36,000 sq.m. NLA) Concord Hospital Stage 1 and 2 expansion 800

Hewlett Packard site Assumes full redevelopment based on a FSR of 2.3:1 7,000* enabling 78,200 sq.m. GFA (approx. 70,000 sq.m. NLA) Gateway West site Approved non-residential uses as per revised Precinct 600 Plan Leeds Street Retail Proposed retail uses as per revised Precinct Plan 280

Gateway East Retail Proposed retail uses as per revised Precinct Plan 250

New Primary School Capacity for 1,000 students as per revised Precinct Plan 60

Total 12,590

*Assumes a ratio of 1 office worker per 10 sq.m. of net lettable area SOURCE - Charter Keck Cramer; .ABS; Department of Planning & Environment; Department of Education; Ethos Urban

The above table indicates long term potential to generate circa 12,590 new jobs in Rhodes. This is based on identified employment generating opportunities along with proposed land uses within the revised precinct plan. The employment generating potential far exceeds the 2036 target range of 6,300 – 8,300 new jobs by 2036 and indicates inherent potential to rationalise the scale of the standalone office development proposed on the subject property.

Rhodes Office Market Analysis PAGE 14

The section provides an analysis of the Rhodes office market and nearby competing locations. The review puts into context the scale of Rhodes in relation to nearby major centres such as Macquarie Park and Parramatta and details indicative quantum of current supply, characteristics of the office accommodation, user profiles and broad commentary relating to potential stock withdrawals and additions (greater detail is provided in this regard within the “Development Pipeline” section of the report.

Sydney suburban office markets accommodate in excess of an estimated 3.2 million sq.m. of total stock. This excludes stock located in the major office centres of Chatswood, Crows Nest / St Leonards, Macquarie Park, North Sydney and Parramatta.

The suburban office markets are dispersed across seven regions – City Fringe, North, Inner West, South, North West, South West and West. Of these, the City Fringe region is the largest, accounting for close to 30% of the suburban office market. Rhodes is located within the Inner West region along with Homebush / Sydney Olympic Park, Ashfield and Burwood. Office stock in Rhodes accounts for just under one third of supply in the Inner West region.

It is noted that as Rhodes is not a major office centre the Property Council of Australia does not publish statistics as part of its bi-annual Office Market Report release. As such, broader research has been undertaken to quantify to market characteristics.

Rhodes has emerged over the past 15 year period as a metropolitan office hub featuring an estimated 150,000 sq.m. of primarily “A” grade standard suburban office space. Most office buildings have been constructed between 2000 and 2010 with typical features including large floorplates, high NABERS ratings, five to ten floors of office accommodation and parking provision of between 1 space per 40 – 60 sq.m. of net lettable area (“NLA”). Approximately 60% of office accommodation in Rhodes is contained within a campus style business park known as Rhodes Corporate Park.

Rhodes is not recognised as a major office precinct and overall there is a limited quantum of stock. In addition land supplies are finite and there are few opportunities to develop new office space.

The majority of existing office accommodation is located within the following properties:

- Rhodes Corporate Park: A circa 90,000 sq.m. campus style business park comprising six freestanding medium-rise office buildings constructed between 2002 and 2004. The buildings offer between 5 - 6 storeys of suburban “A” grade office space and feature large floor plates plus basement parking. Accommodation ranges from small suites up to full multiple floors. The corporate park is located at the southern end of Rhodes East and connects via a pedestrian bridge over the rail lines to link Rhodes Waterside Shopping Centre. Major tenants include Nestle, HP, NAB, Frasers Property Australia (proprietors of the corporate park), Unisys, Citi, Link Group, DHL Supply Chain and additional tenancies such as Windsor Income Protection, Christian Super, Sykes, Greyhound Racing NSW, ABC Consultants, Rawson Group, Defence Force Recruiting and Allied Pinnacle. - Hewlett Packard Enterprise, 410 Concord Road: A 3.4 ha site located to the immediate north of Rhodes Corporate Park in Rhodes East improved with multiple office buildings with a scale of up to five levels. The site is considered under-utilised and Hewlett Packard have partnered with developer Billbergia with a view to redevelop the site into a new high-tech precinct. Planning controls allow circa 78,200 sq.m. of gross floor area which after an allowance for building efficiencies and circulation could equate to a net lettable area of circa 70,000 sq.m. This represents a major opportunity for new office space provision in Rhodes and the largest commercial themed development opportunity in the area. Given the scale of this site it is envisioned that large campus style floorplates will be provided in any proposal which is typically sought after by larger scale users and is evident in recent developments / proposals in Sydney Olympic Park and Macquarie Park. It is mooted that the first stage of redevelopment could commence by mid 2020 which would see the addition of at least 40,000 sq.m. of new office space. Parking provision is understood to be circa 1 space per 40 sq.m. of office accommodation. It is noted that removal of the office component of the current facility would represent a stock withdrawal however the yield of the redevelopment is anticipated to far surpass the current NLA. - Rhodes Business Centre, 9-11 Blaxland Road: A four level “B” grade standard office building including ground floor retail and two levels of basement parking. Features a NLA of circa 2,100 sq.m. held under strata title and primarily configured as individual suites. The property transacted in late 2017 in one line and was marketed as a future redevelopment opportunity. Features one basement car space per 52.5 sq.m. of NLA. - 1 Rider Boulevard: An “A” grade office building located above Rhodes Waterside shopping centre in Rhodes West. Features a net lettable area of circa 5,700 sq.m. across multiple floors and primarily let as office suites sized

Rhodes Office Market Analysis PAGE 15

between 120 – 330 sq.m. The majority of tenants are health service providers with a limited number of financial and employment agencies. - 3 Rider Boulevard: An “A” grade office building located in Rhodes West and constructed circa 2005. An eight level building featuring 7 office floors and ground floor retail with a total NLA of approximately 16,800 sq.m. Large floorplates of circa 2,200 sq.m. with parking provision of one space per 44 sq.m. of NLA. Features a 5.5 star NABERS energy rating and 4-Star Green Star design rating. Major tenants include AAP and Suez along with Allphones, BPAY and Australian Associated Press Pty Ltd. - 5 Rider Boulevard: An “A” grade office building located in Rhodes West and constructed circa 2008. A ten level building offering floorplates of 2,600 sq.m. and a total NLA of approximately 25,000 sq.m. Parking provision of one space per 57 sq.m. of NLA. Features a 5.5 star NABERS energy rating and 4-Star Green Star design rating. Represents one of the largest individual office buildings in Rhodes. The major tenant is Alcatel-Lucent who occupies circa 10,500 sq.m along with Aztec Australia and Carlton & United Breweries.

Figure 11: Sample Office Accommodation in Rhodes

Neighbouring Office Building adjacent to Subject Property Part of Hewlett Packard facility at 410 Concord Road

Example of office accommodation in Rhodes Corporate Park Example of office accommodation in Rhodes Corporate Park

Rhodes Office Market Analysis PAGE 16

Office component within Rhodes Waterside Office buildings fronting Rider Boulevard in Rhodes West SOURCE - Charter Keck Cramer

Sydney Olympic Park (“SOP”) continues to develop as a suburban office hub offering an estimated 170,000 sq.m. of office stock. The area is located approximately 3 kilometres south-west of Rhodes with the office market made up of predominantly suburban “A” grade standard stock (circa 90%) with a modes component of “B” grade space located throughout the more established business park / light industrial properties. Many of these “B” grade properties are mooted for redevelopment or have already been redeveloped.

SOP is considered somewhat of a unique precinct in terms of the area being managed (and initially fully owned) by the Sydney Olympic Park Authority (“SOPA”), a NSW State government entity. Development within SOP is in accordance with the provisions of the Sydney Olympic Park Master Plan 2030 as prepared by SOPA. The Master Plan 2030 (2018 Review) states the following in relation to office space:

“Commercial uses will be concentrated along Murray Rose Avenue, Dawn Fraser Avenue, Herb Elliot Avenue and new streets within the Central Precinct to promote a vibrant and compact Town Centre area and act as a noise barrier between the event areas and neighbouring residential precincts.”

The majority of “A” grade office accommodation has been developed over the past 15 years and is typically offered within medium rise (5 to 6 levels) buildings featuring large floor plates of 2,000 to 3,000 sq.m. In late 2018 GPT completed construction of 4 Murray Rose Avenue which offers circa 15,700 sq.m. of NLA across 6 floors with circa 3,000 sq.m. floorplates (smaller at ground and first floor levels). The scale and configuration of this development is considered broadly in keeping with the existing character of the office precinct. As per the Master Plan (2018 Review) parking for commercial space is provided at the rate of 1 space per 80 sq.m.

Major tenants within SOP include a range of finance, technology, government and professional services including Samsung, Lion, NRMA, NSW Rural Fire Service and Charles Sturt University.

CBA has vacated circa 18,800 sq.m. of high quality space at 2 Dawn Fraser Avenue as part of its relocation strategy to Australian Technology Park in Redfern which sees consolidation of operations including the SOP, Lidcombe and Parramatta offices. The vacated SOP office space is understood to be available for lease which has increased the typically low vacancy rate.

SOP has traditionally been a well sought after location evidenced by vacancy rates which historically have trended below 5%. This is due in part to the provision of high quality floorspace, competitive price points, limited new stock additions (lack of supply), centralised metropolitan location, accessibility and general amenity of SOP. With the CBA space being vacated and circa 6,300 sq.m. of accommodation yet to be filled within the new 4 Murray Rose Avenue development the vacancy rate is currently higher than normal although demand fundamentals remain strong in the area.

SOP is well serviced by arterial roads and public transport in the form of trains, buses and ferries (via Parramatta River). As noted, the Sydney Metro West rail project proposes to include a new train station in Sydney Olympic Park and Stage 2 of the Parramatta Light Rail project is proposed to extend to Sydney Olympic Park.

“Macquarie Park Corridor” is a 350 hectare employment lands area incorporating the business park precincts of Macquarie Park and Riverside. It is a major employment centre and innovation district 7 kilometres north east of Rhodes.

Rhodes Office Market Analysis PAGE 17

Macquarie Park forms part of the “North Shore” office region, comprising the areas of North Sydney, Crows Nest / St Leonards, Chatswood and Macquarie Park. Macquarie Park is the western most office location within the North Shore.

As at July 2018 Macquarie Park accommodated a total office supply of 869,034 sq.m, as per the Property Council of Australia Office Market Report and is the second largest office precinct in New South Wales. The Sydney CBD is the largest office market in New South Wales (and Australia) with total office supply of 5,036,168 sq.m (July 2018) which is close to 5.8 times the size of Macquarie Park. Putting the scale of the Rhodes office market into context, Macquarie Park is approximately the 5.8 times larger than Rhodes and the Sydney CBD is 33.6 times larger in NLA.

Total office stock Macquarie Park is divided into the following grades:

- A Grade: 74.2% - B Grade: 23.7% - C Grade: 1.8% - D Grade: 0.3%

Over the past five years to July 2018 there have been stock additions totalling 112,764 sq.m. and total stock withdrawals of 83,679 indicating net additions of 29,085 sq.m.

Over the past five years to July 2018, net absorption has totalled 87,763 indicating solid take-up of both new and existing space and an indication as to why vacancy rates have continued to trend downwards.

Macquarie Park contains a range of key research, business and employment generating assets including Macquarie Shopping Centre, Macquarie University, University hospital and CSIRO facilities. Macquarie Park accommodates a number of the world’s largest companies and is a hub for health, education, technology, electronics and telecommunications industries. Macquarie Park currently supports in the order of 45,000 employees.

Most commercial development has been completed over the past 15 year period with a considerable proportion of office stock of a suburban “A: Grade Standard. Prior to commercial use the area was initially configured as a more traditional industrial location. The scale, configuration, age and grade of office stock varies but is broadly low rise (with some buildings up to 10 levels in height) campus style accommodation with large floorplates. As per Ryde Local Environmental Plan 2014 parking for commercial space is varies dependent on location ranging from 1 space per 46 sq.m. of GFA up to 1 space per 80 sq.m. of GFA.

Macquarie Park has become a greater focus for mixed use and residential development in recent years given improved local infrastructure provision, increased focus on transport oriented development and favourable developer returns for residential projects. This is evidenced by numerous recent and proposed high density apartment buildings including the proposed remodelling of the Macquarie Centre which is anticipated to accommodate a mix of residential and commercial accommodation across four high rise towers. An increased localised population density is anticipated provide greater opportunities to develop additional office accommodation in Macquarie Park.

Examples of tenants located in Macquarie Park include Philips, Aristocrat, Canon, Sanofi, Orix, Optus, Novartis Pharmaceuticals, Johnson and Johnson Medical and Fuji Xerox.

The Parramatta CBD is a major, well established office market classified as being in the “North West” region of Sydney. Parramatta is located 10 kilometres west of Rhodes. Being a major CBD centre, Parramatta is a vastly different office market to Rhodes given it’s scale, amenity and access to transport infrastructure (current and proposed).

As per the July 2018 release of the Property Council of Australia Office Market Report, Parramatta CBD accommodates 719,619 sq.m. total office stock which includes the following grades:

- A Grade: 45.1% - B Grade: 30.1% - C Grade: 13.5% - D Grade: 11.2%

Over the past five years to July 2018 there have been stock additions totalling 74,697 sq.m. and total stock withdrawals of 46,781 indicating net additions of 27,916 sq.m.

Rhodes Office Market Analysis PAGE 18

Over the past five years to July 2018, net absorption has totalled 105,876 indicating very strong take-up of both new and existing space and an indication as to why vacancy rates have continued to trend downwards so considerably.

Parramatta is home to a strong contingent of large companies and government tenancies with Parramatta now emerging as a second CBD location servicing Western Sydney. Larger firms are attracted to Parramatta by its centralised metropolitan location and access to quality public transport. This is anticipated to improve further with the introduction of the Parramatta Light Rail and Sydney Metro West.

The Parramatta office market is currently experiencing a period of strong absorption and growth with the current vacancy rate in Parramatta CBD is the lowest within all Sydney office markets.

A number of new developments are planned / mooted in coming years with much of this initial new supply already pre- committed. New office development is primarily focussed within the Parramatta Square precinct, a major CBD renewal project.

New development has also been encouraged by proposed planning uplifts which enable significant increases in floor space ratios and height limits. As such there has been increasing market activity with numerous sites marketed and sold as redevelopment sites within the city centre.

Over the past year there has been considerable growth in effective rents given limited new supply and ongoing increases in demand levels. Investment yields have also firmed although given a limited supply of properties there have been limited transactions. Given proposed planning uplifts a number of properties have been marketed and sold as redevelopment sites.

In addition to the office hubs and major centres identified above, various local centres within the inner west area feature office accommodation. Larger tenancies in these locations tend to include Government tenants within the few larger scale premises offering larger floorplates.

Local centres include Lidcombe, Burwood and Strathfield:

- Burwood: A medium sized suburban office market, some 7 kilometres south-east of Rhodes. Burwood differs to Rhodes and SOP in terms of quality and size of office space. Burwood comprises an estimated 90,000 sq.m. of established “B” and “C” grade accommodation, with generally smaller floor plates. The office accommodation is generally located in close proximity to Burwood train station. Burwood’s office space is occupied by predominantly professional services, including legal services associated with the local court, and a wide range of small medical practices which are concentrated in mixed use buildings south of Burwood train station. More modern office space is located in closer proximity to the railway corridor which provide large floorplates. Burwood is well serviced by public transport including trains and buses, and is in close proximity to arterial roadways. The market does suffer from a lack of quality “A” grade space. - Lidcombe: The Lidcombe office market broadly reflects the typical small suburban office market featuring modest size office suites above main street retail shops. They are predominantly found on John Street in proximity to Lidcombe train station. Office suites in the area are of an older vintage in need of modernisation and generally only offer on street parking. Many office suites are typically leased to small local service firms. Lidcombe also features a limited number of business park developments in the northern section of the suburb fronting Parramatta Road. These offer more contemporary space with larger floorplates and on site parking. Floorplates is still well below those in Rhodes and SOP. It is noted that a significant amount of office space offered in these business parks could be classified as distribution centres / office and or showroom / offices. Lidcombe benefits from being well serviced by rail and bus services although SOP for example is better accessed by arterial roads. - Strathfield: A well-established small scale suburban office market located approximately 5.5 kilometres south of Rhodes. The town centre is characterised by secondary grade office stock occupied by local services. The office space predominantly forms part of mixed use buildings with smaller office suites part of main street retail. There are a limited number of larger office developments within the town centre offering more conventional scale floorplates and modern accommodation. Some such locations include along Raw Square and above Strathfield Plaza. The most notable area featuring modern office content is the 6 hectare Bakehouse Quarter precinct which is located in North Strathfield. This mixed retail and commercial area has been developed over the past 10 years and currently offers contemporary space with some floorplates of circa 2,700 sq.m. It is understood the Bakehouse Quarter features a total NLA of close to 54,000 sq.m.

Rhodes Office Market Analysis PAGE 19

There has been limited new supply of office accommodation in recent years with total floorspace in Rhodes remaining stable at an estimated 150,000 sq.m. Whilst the Property Council of Australia does not release vacancy rate data for Rhodes as it is not a major office precinct, a review of office stock currently listed for lease indicates a vacancy rate of circa 15% for Rhodes. To confirm the exact vacancy a thorough audit of all office stock would be required however based on the review completed by Charter the indication is that whilst vacancy rates in major suburban office precincts have progressively decreased over the past five years to record lows, vacancy in Rhodes is still trending at a comparatively high rate.

Most vacant office stock in Rhodes is located within Rhodes Corporate Park and 3 & 5 Rider Boulevard where a number of whole floors are available. This includes two contiguous floors within Rhodes Corporate Park featuring a combined NLA of 6,740 sq.m. which in isolation represents approximately 4.5% of total Rhodes office stock.

Research released by Knight Frank in 2018 indicated a vacancy rate of circa 9% for the Inner West region which includes the locations of Rhodes, Sydney Olympic Park, Ashfield and Burwood. Historically, vacancy rates in Sydney Olympic Park have trended at below 5% however over the past year this too has increased due to CBA relocating out of the area and completion of 4 Murray Rose Avenue which is yet to be fully leased. Whilst this represents a considerable quantum of total office supply in SOP (circa 18%), the accommodation is of a high standard and market expectations are that the accommodation will be taken up in the short term thus considerably reducing overall vacancy.

The difference between SOP and Rhodes in terms of vacancy profiles is that the majority of vacancy in SOP is contained within two spaces whereas the vacant space in Rhodes is fragmented between a considerable number of buildings, suites and floors.

With this in mind, market fundamentals in Rhodes remain satisfactory with rents showing growth and yields in recent years firming. This is considered a result of strong performance in the broader market particularly in locations such as the Sydney CBD, North Sydney, Macquarie Park and Parramatta. Within these locations strong performance has been highlighted by historically low vacancy rates, considerable rental growth, a reduction in rental incentives and growth in the development pipeline. This has had a flow on effect for locations such as Rhodes which have benefitted from additional demand from tenants unable to secure space in primary office locations or have been outpriced from these precincts.

As a point of comparison, July 2018 Property Council of Australia Office Market Report statistics have been reviewed for the commercial centres of Macquarie Park and Parramatta. These are highlighted in the below table. 25,000 sq.m. of accommodation within a modest scale office hub

Major Suburban Market Vacancy Rates

Grade Macquarie Park Parramatta “A” Grade 3.4% (21,694 sq.m.) 1.0% (3,237 sq.m.) “B” Grade 11.7% (24,090 sq.m.) 4.4% (9,525 sq.m.) “C” Grade 10.1% (1,550 sq.m.) 7.1% (6,933 sq.m.) “D” Grade 0.0% (0 sq.m.) 3.9% (3,177 sq.m.) Total Market 5.4% (47,334 sq.m.) 3.2% (22,872 sq.m.)

Of note within these major precincts is the flight to quality, with historically low vacancy currently evident for “A” grade stock. Parramatta has been a clear performer with only 1.0% vacancy as at July 2018 representing only 3,237 sq.m. in real terms. Total vacancy in Parramatta at 22,872 sq.m. indicates a vacancy rate of only 3.2%. The quantum of vacant space currently available in both Rhodes and SOP (individually) is greater than in Parramatta although the Parramatta market. Putting this into context total supply of office stock in Parramatta is approximately 6.6 times larger in NLA than Rhodes.

With a considerable development pipeline in Parramatta to satisfy pent up demand, the vacancy rate is anticipated to remain low with strong take-up expected. Where this is limited new supply and difficulty in securing stock, locations such as Rhodes and SOP tend to garner additional attention as an alternative option. This is also the case when price points inflate and impact affordability.

Vacancy rates in Macquarie Park indicate solid market performance with the current rate of 5.4% for all stock (and 3.4% for “A” grade space) indicating a marked decrease from a high of 11.2% in July 2014. Macquarie Park is considered a key competitive market to Rhodes given its location a short distance north east. Macquarie Park is considered to offer

Rhodes Office Market Analysis PAGE 20

superior amenity to Rhodes in terms of public transport infrastructure (current and proposed) and offers good lifestyle amenity being co-located Macquarie shopping centre, Macquarie University and hospital facilities. In addition, many of the “A” grade office buildings provide large floorplate campus style accommodation with ample parking with these characteristics well sought after in the market.

Rhodes Office Market Analysis PAGE 21

The supply pipeline for new commercial stock is limited in Rhodes within the short term with no significant additions likely until 2020+. At this time 410 Concord Road represents the only significant office project proposed in Rhodes.

With regard to the broader region, the primary focus is in the major centres of Macquarie Park and Parramatta with approximately 550,000 sq.m. collectively proposed. The majority of the proposals in Macquarie Park are mooted with limited firm proposals in the short to medium term. This is part is considered due to development focus shifting in recent years from office to residential. However, given a continuation of the subdued residential apartment market, office projects are being reconsidered by some who were initially considering residential.

Parramatta in contrast features a number of projects currently under construction.

The following table outlines the future supply pipeline in Rhodes and nearby office locations:

Rhodes & Suburban Office Precinct Development Activity Proposed NLA Estimated Address Precinct Project Stage (sq.m.) Completion 410 Concord Road Rhodes 70,000^ 2020+ Early Planning 45 Waterloo Road Macquarie Park 35,000 2019 DA Approved 197-223 Herring Road Macquarie Park 2,081 2020+ DA Approved 11 Talavera Road Macquarie Park 24,000 Mooted DA Approved 8-12 University Avenue Macquarie Park 50,000 Mooted DA Lodged 95 Waterloo Road Macquarie Park 14,874 Mooted DA Lodged 396 Lane Cove Road Macquarie Park 45,000 Mooted DA Lodged 31-35 Epping Road Macquarie Park 14,477 Mooted DA Lodged Lot 8 Julius Avenue Macquarie Park 34,194 Mooted DA Approved 105 Phillip Street Parramatta 25,000 2018 Complete 30 Darcy Street Parramatta 80,000 2019 Construction 426 Church Street Parramatta 1,920 2019 Construction 50 Macquarie Street Parramatta 25,222 2020+ DA Lodged 153 Macquarie Street Parramatta 46,000 2020+ Construction 140 George Street Parramatta 45,700 2020+ DA Approved 142-154 Macquarie Street Parramatta 21,000 2020+ DA Lodged 116 Macquarie Street Parramatta 6,000 2020+ DA Lodged 159-175 Church Street Parramatta 100,000 Mooted DA Lodged 10 Valentine Avenue Parramatta 9,000 Mooted DA Approved 4 Murray Rose Avenue Sydney Olympic Park 15,700 2018 Complete Pt Lot 201 cnr Sarah Durack Avenue Sydney Olympic Park 3,500 2019 Construction 2A & 2B Australia Avenue Sydney Olympic Park 40,000 2020+ Early Planning 181 James Ruse Drive Camellia 30,000 2020+ DA Lodged 38-42 Wharf Road Melrose Park 25,500* 2020+ DA Approved 1-9 The Boulevarde Strathfield 6,800 2020+ DA Approved Total 770,968 ^ Preliminary estimate only * Includes 10,500 sq.m. of retail space SOURCE - Charter Keck Cramer; Cordell Connect, Property Council of Australia

A total of 25 office related development projects are proposed in office precincts and centres nearby to Rhodes. These feature an aspect of office accommodation or are major office proposals. Only one office project is mooted in Rhodes being the proposed redevelopment the Hewlett Packard facility at 410 Concord Road. Limited information is available in relation to this project which remains in its early stages. Based on current planning controls there is however potential to accommodate circa 70,000 sq.m. of additional NLA which would represent a significant increase to local supply. Given the scale of this property there is inherent potential to provide large floorplate campus style office accommodation – this is considered the only site in Rhodes with the opportunity to provide such accommodation as all other land is confined in size.

Strong performance in recent years by the Parramatta office market has translated into a substantial development pipeline with nine projects currently either under construction or proposed. Once complete this will offer an additional

Rhodes Office Market Analysis PAGE 22

NLA of approximately 335,000 sq.m.. The most recent completion has been the development at 105 Phillip Street which additional NLA of 25,000 sq.m. to overall supply. The majority of additional projects in Parramatta are typically substantial in size with six of the nine developments to be sized between 25,000 - 100,000 sq.m. The average sized development is circa 36,000 sq.m. With Parramatta CBD being a major and well established centre, the majority of development is of a high rise configuration.

Approximately 43,500 sq.m. of new office is proposed in Sydney Olympic Park however the majority of this is at an early planning stage.

Macquarie Park represents the next major contributor in the office development pipeline with eight projects proposed totalling approximately 220,000 sq.m. Average NLA of the proposals is approximately 27,500 sq.m. Many of these projects are at DA stage and are considered longer term propositions however the pipeline is very strong.

Whilst there is limited information relating to all development proposals, it would appear that most projects in both Sydney Olympic Park and Macquarie Park will focus on providing low to medium scale campus style office buildings featuring large floorplates of between 2,000 sq.m. and 3,000 sq.m. This continues development trends over the past 10 year period and provides an indication as the product type most sought in from a market perspective.

A number of one-off longer term proposals are also proposed in non-core locations such as Camellia, Melrose Park and Strathfield. In addition, some 40 mixed use projects throughout the region are proposed to include small scale ground floor retail and commercial components.

Of note however is that the majority of major proposals are focussed in key centres due to market fundamentals, demand factors and supply limitations, land availability and accessibility to transport infrastructure and workforce.

Rhodes Office Market Analysis PAGE 23

In order to demonstrate indicative timing of future potential supply, the following chart summarises current and future projects in Rhodes and nearby office market locations. This includes developments under construction and approved / mooted projects. Identified projects are listed by estimated completion dates.

Figure 12: Future Supply Development Pipeline

120,000 2018 2019 2020 + Mooted 40,700 sq.m. 120,420 sq.m. 318,300 sq.m. 291,550 sq.m.

100,000

80,000

60,000

40,000 Commercial Building sq.m. Area Building Commercial

20,000

0

Complete Construction DA Approved DA Lodged Early Planning SOURCE - Charter Keck Cramer; Cordell Connect, Property Council of Australia

Rhodes Office Market Analysis PAGE 24

The following table highlights key market metrics for typical “A” grade office space in Rhodes based on available market information.

Rhodes – Office Market Indicators

Key Indicators Rhodes Macquarie Park Parramatta

“A” Grade Stock Circa 150,000 sq.m. 644,824 sq.m. 324,617 sq.m. Inner West Circa 9% Vacancy Rate 3.4% 1.0% Rhodes Circa 15% Capital Value p.s.m. $5,500 - $7,500 $6,500 - $7,500 $8,500 - $10,000 Market Yield 5.5% - 7.0% 5.5% - 6.0% 5.25% - 5.75% Net Face Rent (p.s.m.) $300 - $450 p.s.m.p.a. $330 - $420 p.s.m.p.a. $500 - $550 p.s.m.p.a. Incentives 20% - 25% 23% - 27% 15% - 17% Outgoings (p.s.m.) $70 - $100 p.s.m.p.a. $90 - $120 p.s.m.p.a. $105 - $120 p.s.m.p.a. Flexible: 5 - 10 years on larger Flexible: 5 - 10 years on larger Flexible: 5 - 10 years on larger Typical Initial Lease Term (years) spaces. spaces spaces. Reserved Car Spaces $250 - $300 p.c.m. $225 - $275 p.c.m. $225 - $275 p.c.m.

SOURCE - Charter Keck Cramer; Property Council of Australia; JLL; Knight Frank; Colliers; Savills.

The major centre of Parramatta features the highest rents and capital values for “A” grade stock whilst having the lowest yields and rental incentives. In addition Parramatta also has the lowest vacancy rate.

Macquarie Park and Rhodes are relatively similar in terms of rental pricing and capital values although investment yields on the whole are firmer in Macquarie Park indicating greater investor interest for this location.

Reserve car spaces are priced highest in Rhodes primarily due to limited availability.

Rhodes is a modest scale office hub with few commercial properties. Accordingly there have been few transactions in recent years. The most notable sales in Rhodes and nearby locations are summarised in the below table.

Sales Evidence Summary NLA Value Sale Price / NLA Rate Initial Address Sale Date (sq.m.) (p.s.m.) Yield Comments 3 & 5 Rider Boulevard $235,000,000 16,800 + $5,622 7.5% Two neighbouring “A” grade office Rhodes 06/16 25,000 buildings purchase in one line by Altis 9 – 11 Blaxland Road $14,040,0000 2,100 $6,687 5.8% Four level strata office building transacting Rhodes 07/18 in one line – redevelopment potential. 15 – 17 Blaxland Road $28,820,000 1,980 $14,556 2.0% Part of the subject property, purchased as Rhodes 05/17 a as a development site. 11 Murray Rose Avenue $16,000,000 5,810 $2,754 VP New six level “A” grade facility purchased Sydney Olympic Park 07/17 by Folkstone. 10 Dawn Fraser Avenue $80,100,000 23,390 $3,425 7.9% Six level “A” grade office building with Sydney Olympic Park 05/16 floorplates up to 3,600 sq.m. Leasehold. Bakehouse Quarter $380,000,000 c. 54,000 $7,037 N/A Expansive mixed-use precinct purchased North Strathfield 06/17 by YuHu Group from BlackWall.

SOURCE - Charter Keck Cramer; JLL; Knight Frank; Colliers; Savills.

The sales presented above include a mix of local and foreign funds who have acquired the “A” investment grade assets. The Blaxland Road properties in Rhodes offer considerable development upside and feature holding incomes which is highlighted in the associated yield.

Rhodes Office Market Analysis PAGE 25

The investment sales which have transacted throughout the area are now considered somewhat dated and based on the strength of the suburban office investment market in recent years investment yields have firmed. This has been particularly evident in CBD locations and major office centres where there has been limited stock available for purchase and strong rental growth.

In light of vacancy rates generally trending downwards throughout the broader market over the past 5 years, strong rental growth has been evident for “A” grade stock.

Recent market evidence indicates that net rents in Rhodes have increased by circa 4% over the past 12 months with rental incentives on average around 23%.

This growth is reflective of ongoing demand for quality rental stock in suburban locations as tenants have been outpriced from city centre locations or are unable to secure stock in areas such as the Parramatta CBD which has close to zero vacancy.

Available market evidence suggests that net face rents for office accommodation in Rhodes are in excess of those being achieved in Macquarie Park although are notably less than rents achieved for “A” grade stock Parramatta CBD where growth has been strong in recent years and incentives have declined.

With no recent stock additions and limited opportunity for new supply the Rhodes market has achieved satisfactory demand although the somewhat fragmented nature of the current vacant stock and additional stock availability at nearby Sydney Olympic Park has contributed to increased vacancy in the area.

Businesses looking for office space in Rhodes are typically attracted to the close proximity of Sydney CBD and the more affordable rent.

A sample of office suites currently listed for rent are highlighted in the below table.

Office Suites For Lease in Rhodes Asking Asking Net NLA Face Rent Address Rent (sq.m.) (p.s.m.) Comments 1.01, 1 Homebush Bay Drive $592,620 1,743 $340 Level 1 suite within Rhodes Corporate Centre. Rhodes 1.05, 3 Rider Boulevard $90,850 230 $395 Level 1 suite within a modern building. Rhodes 1.04, 3 Rider Boulevard $178,640 464 $385 Level 1 suite within a modern building. Rhodes 4.04 1 Homebush Bay Drive $188,700 555 $340 Level 4 suite within Rhodes Corporate Centre. Rhodes 2.01, 3 Rider Boulevard $205,200 513 $400 Level 2 suite within modern building. Rhodes Suite 4, 3 Rider Boulevard $930,300 2,215 $420 Modern “A” grade accommodation. Rhodes Level 3, 5 Rider Boulevard N/A 2,623 N/A Level 3 “A” grade accommodation Rhodes Suite 2, 5 Rider Boulevard N/A 813 N/A Level 2 “A” grade accommodation Rhodes 6.04, 5 Rider Boulevard N/A 585 N/A Level 6 “A” grade accommodation Rhodes G.01, 1 Homebush Bay Drive $292,200 974 $300 Ground floor suite within Rhodes Corporate Rhodes

SOURCE - Charter Keck Cramer; JLL; Knight Frank; Colliers; Savills.

A variety of office suites are currently available for lease in Rhodes ranging from small suites to whole floors. The available rental stock is collectively located within Rhodes Corporate Centre and the office buildings at 3 and 5 Rider Boulevard.

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Rhodes is the subject of a number of strategic planning policies which include directions relating to the office market and employment generation. These policies collectively outline Government’s vision for not only the local area but the broader Sydney Metropolitan Area.

The key planning study relating to subject property is the “Rhodes Revised Draft Precinct Plan” issued by the NSW Department of Planning and Environment in December 2018. Also of relevance are policies such as the “Greater Sydney Region Plan”.

In September 2017, The NSW Department of Planning and Environment released the “Rhodes East Priority Precinct Investigation Area” planning report. This draft report pertained to the eastern section of Rhodes extending between the Rail lines and extending north to the end of Rhodes peninsula and east to Brays Bay. The Rhodes Revised Draft Precinct Plan was released in December 2018 as an update to the September 2017 draft report.

Under the revised plan the precinct was refined in scale now extending between the western side of Concord Road to the rail line and north to the Parramatta River foreshore. Also included is an area on the western side of Rhodes train station. The precinct and associated planned zoning classifications are show in the below plan extract.

Figure 13: Land Use Strategy for the Precinct

SOURCE - Charter Keck Cramer; Rhodes Revised Draft Precinct Plan

As per the revised plan, the subject property is designated with a proposed zoning classification of B3 – Commercial Core. The subject is the only site to be designated with this classification (but for the modest scale land neighbouring to the south) indicating an intention by Government for the subject land to accommodate all new office development within the precinct. This change in proposed zoning classification represents the major differential to the subject property between the September 2017 draft precinct plan and the December 2018 revised plan.

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Under the initial 2017 draft release the subject property was designated with a proposed B4 – Mixed Use zoning classification and formed part of the “Rhodes East Gateway” character area. The proposed retail and commercial uses at this stage were as follows:

“Rhodes East Gateway – convenience retail is proposed adjacent to the station as part of the Rhodes East Gateway Area. Potential uses may include a supermarket, specialty grocer, restaurants and takeaways, specialty and personal services, and non-retail services.”

This indicates that as part of a potential mixed-use site there was limited focus for the subject to provide commercial office space with development to moreso feature a mixed of retail and residential land uses.

In general, the planning controls under the 2017 draft were considered more “prescriptive” in terms of applying specific floor space ratios and height limits. The revised plan moves more towards “permissibility” based controls as per the following statement:

“Whilst the plan sets the maximum number of dwellings and gross floor area (GFA) for each character area, the ability for proposed development to meet these design requirements will determine the appropriate height, density and design of buildings in the character area.”

Under the revised plan the subject property now forms part of the “Station Gateway East” character area. The following excerpts from the revised plan provide insights as to why the proposed zoning classification and uses have been changed:

“It also provides an opportunity to respond to recent changes in the context of Rhodes, adapting to and incorporating the Greater Sydney Commission job targets……”

“This plan also reacts to the changing context of Rhodes by providing …… an additional 1,200 jobs within the precinct”

“Since the 2017 public exhibition of the draft Precinct Plan, new and updated information has emerged relating to ….. the need to provide more local jobs for Greater Sydney and Rhodes peninsula”

“While planning for the entire precinct was affected by changes in context, the area most affected was the area close to Rhodes Station. The station area provided the opportunity to consider job growth……”

“Provide employment floorspace near the station to secure long term commercial employment opportunities and provide jobs closer to homes. Enhance the Station Gateway and Leeds Street character areas to provide commercial/retail hubs for residents, workers and visitors.”

“Safeguard employment land adjacent to the train station to encourage future commercial development and high order jobs.”

“A commercial core has been established within Station Gateway East, to help create up to 1,200 new jobs close to public transport.”

“On the eastern side of the train line, this character area will extend north from the train station to include more properties along Blaxland Road. The Station Gateway has been identified as the best area for future employment and higher density residential development……”

“The precinct will be a hub for employment with a commercial core being established in the Station Gateway East character area. This commercial core will help in providing up to 1,200 more jobs in the Rhodes precinct in the future, close to new homes. These jobs will add to other employment opportunities in the area, including the expansion of Concord Hospital future employment at the Rhodes Corporate Park and future redevelopment of the Hewlett Packard site south of Rhodes Station.”

“The District Plan highlights the need to strengthen and reinforce the economic role of the centre with the delivery target of between 6,300 and 8,300 new jobs by 2036……. The redevelopment of the Hewlett Packard site was identified as a significant future employment site. The revised draft Plan area could deliver 1,200 additional jobs by 2036 or 2,200 jobs by 2041. This includes around 600 jobs in Station Gateway West. This is predicated on the development of 40,000sqm of commercial floorspace in Station Gateway East. These jobs will be located close to homes and public transport.”

“Provide for additional jobs in standalone commercial buildings, supported by appropriate retail and other uses to create activity at ground level. Development to support the commercial precinct to the south.”

The end result is a proposed zoning amendment intended to facilitate the development of circa 40,000 sq.m. of employment generating office accommodation over the subject property. The intent is that the site contains all

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proposed new office within standalone buildings and would contribute to the 1,200 job target by 2036 or 2,200 jobs by 2041.

Therefore, the subject property would be required to house a new office building larger in scale than any other current office building within Rhodes. Given the relatively modest size and somewhat elongated configuration of the subject property, any development would be anticipated to require significant height to ensure that circa 40,000 sq.m. could be accommodated.

It would appear that the primary reason the subject has been designated with the commercial zoning is due to location adjacent to station. Land to west of station is considered very well positioned to also accommodate office development and would provide a logical northern extension of the office buildings located at 3 and 5 Rider Boulevard.

In terms of car parking rates, revised plan proposes rates well below current provision in most suburban office locations. The proposed parking rate for commercial land uses is 1 space per 150 sq.m. of GFA. This translates to approximately 1 space per 135 sq.m. of NLA. Parking provision in office buildings throughout Rhodes translates to on average 1 space per 50 sq.m. of NLA which indicates a much higher provision to what is proposed. This is considered to clearly disadvantage the subject property as the commercial reality is that many corporate suburban office tenants who would be likely to take space within a new large scale development would still require parking and would make leasing decisions accordingly.

Included within the Rhodes Revised Draft Precinct Plan is an outline of additional Government strategies which relate to the role of Rhodes (including employment generation). Details of these strategies and excerpts pertaining to Rhodes are provided below.

The Rhodes Revised Draft Precinct Plan states the following in relation to the Greater Sydney Region Plan and the relationship to Rhodes:

“The Greater Sydney Commission has outlined the vision for metropolitan planning of Greater Sydney in the Greater Sydney Region Plan. The Greater Sydney Region Plan, released in March 2018, sets the planning framework for the five districts which make up the Greater Sydney Region. It establishes a 40-year vision to 2056 for Greater Sydney to be a metropolis of three cities, enabling most people in Greater Sydney to commute to their nearest city within 30 minutes. The three cities are: Western Parkland City, the Central River City and the Eastern Harbour City.

The Region Plan provides strategies for infrastructure and collaboration, liveability, productivity, sustainability and implementation supported by 10 key directions, all of which are reflected in the revised draft Plan for Rhodes.

Rhodes is located within the Eastern Harbour City. It is a strategic centre with an important commercial office precinct. The retention and growth of these areas is important for Sydney’s global competitiveness in the future. Rhodes has also identified as one of five Collaboration Areas, with a focus on fostering sustainable infrastructure for water and energy.”

“The Sydney Region Plan identifies Rhodes as one of 34 Strategic Centres.”

“Strategic centres are expected to accommodate high levels of private sector investment, enabling them to grow and evolve. They will become increasingly important parts of the region’s structure and support the 30-minute city.”

As a strategic centre within the Greater Sydney Region Plan, Rhodes is identified as an important location assisting to support the “30-minute city” concept and having a mixed role as residential and employment generating.

The Rhodes Revised Draft Precinct Plan states the following in relation to the Eastern City District Plan:

“The Greater Sydney Commission has prepared district plans which guide the implementation of the Region Plan at a district level and act as a bridge between regional and local planning.

Rhodes is identified as a strategic centre in the Eastern City District Plan. It is also identified as a collaboration area. The strategic centre incorporates the entire peninsula including the employment and Concord Hospital to the south.

The district plan describes Rhodes as a ‘great place’, where there is a focus on creating a people friendly public realm, including open space, streets and centres.

This plan seeks to address and respond to the key actions in the District Plan. A key component is the delivery of between 6,300 and 8,300 new jobs in the Rhodes peninsula by 2036.”

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The District Plan identifies specific actions for Rhodes which include:

- protect capacity for job targets and a diverse mix of uses to strengthen and reinforce the economic role of the centre - protect employment generating capacity at Rhodes Business Park - improve links to the Greater Parramatta and Olympic Park area - enhance links with Concord Health Precinct - promote place-making initiatives to improve the quality of public spaces - develop opportunities to provide sustainable utility infrastructure - create a connected walking and cycling network within the precinct, to regional links and where possible along river foreshores - plan for growth that is supported by public transport.”

As per the District Plan, the entire Rhodes precinct will be required to support a considerable increase in job numbers progressively by 2036 and 2041. The subject property within the revised draft precinct plan has been targeted as a site to assist in achieving the required job numbers.

The Rhodes Revised Draft Precinct Plan states the following in relation to the Future Transport Strategy 2056

“This strategy, prepared by Transport for NSW, sets the vision, direction and outcomes framework for NSW transport investment. The Strategy was released in March 2018 to set a 40 year vision, direction and outcomes framework NSW to guide transport investment over the long term.

This strategy goes beyond infrastructure delivery. It links transport to land use, tourism and economic development. Transport planning has evolved from focusing on individual modes of transport, such as buses or trains, to providing integrated solutions for the future. It does this by providing issue-specific and place based plans.

There is an emphasis on the role of transport in delivering movement and place outcomes that support the character of the places and communities we want for the future. A key principle of this plan is to encourage mode shift away from cars and towards public transport.

Rhodes benefits from being located on the T1 Northern train line and the Parramatta River, offering both train and ferry access to jobs and opportunities around Sydney. The revised draft Plan takes into consideration the role of Rhodes in the wider transport infrastructure network and explores opportunities to upgrade the existing train station and a new ferry wharf in the Parramatta River foreshore to improve accessibility to the area and potential to integrate with future transport services such as Metro and Light Rail.

These measures contribute to create a 30-minute city as well as mode shift to public transport.”

With limited capacity to upgrade / widen Concord Road and the rail lines, introduction of a ferry terminal is the primary option available to Rhodes.

It is noted that a shift away from cars towards public transport is encouraged however for corporate office users in suburban locations the commercial reality is that many have a minimum parking requirement.

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Charter has been appointed by Ecove to prepare an Office Market Analysis of the Rhodes precinct as the subject property has recently been designated with a proposed B3 – Commercial Core zoning classification which permits standalone office accommodation.

The review is in response to the December 2018 release of the Rhodes Revised Draft Precinct Plan by the NSW Department of Planning and Environment. This release updates the initial September 2017 Rhodes East Priority Precinct Investigation Area which designated the subject property with a B4 – Mixed Use zoning permitting retail, commercial and residential uses.

The intention of the review has been to clearly understand the potential demand and viability of undertaking such a large scale development within Rhodes.

Based on our review the following summary and conclusions are offered:

- Rhodes is a modest scale suburban office hub offering circa 150,000 sq.m. of commercial net lettable area. Most office accommodation has been developed over the past 15 years and is primarily of a suburban “A” grade standard. The majority of office space is located to the south of the subject property within Rhodes Corporate Park (60%) and additionally within contemporary office developments along Rider Boulevard adjacent to (and within) Rhodes Waterside shopping centre in Rhodes West. There have been minimal new stock additions to Rhodes in recent years. - It appears that the primary reason for the proposed zoning amendment to the subject property is due to new employment targets released by the Greater Sydney Commission subsequent to the initial September 2017 Rhodes East Priority Precinct Investigation Area Planning Report. Accordingly, there is a target for creating 1,200 new jobs within Rhodes East by 2036. The subject property has been earmarked to accommodate the majority of the job targets by Government within a standalone office featuring a GFA of circa 40,000 sq.m. A high rise development would be required to house such a considerable content of office space on the subject property. - Contemporary “A” grade office buildings throughout Rhodes feature NLAs ranging on average between 12,000 – 17,000 sq.m. Rhodes Corporate Park collectively accommodates circa 90,000 sq.m. of NLA however this is held within six buildings (averaging approximately 15,000 sq.m. per building). At least 36,000 sq.m. of office NLA (40,000 sq.m. GFA) is mooted for the subject property under the revised precinct plan. This represents approximately one quarter of current office supply in Rhodes and a NLA more than double the size of many current buildings. New development proposals in the major centres of Macquarie Park and Parramatta feature average respective building sizes of 27,500 sq.m. and 36,000 sq.m. being less than or similar to the proposal for the subject property. Given the vastly superior nature and scale of these locations, the large building scale proposed for the subject property is unlikely to be supportable from a financial feasibility perspective given its location within a non-core commercial hub. - The majority of new office development proposed throughout the broader suburban region is located in the major city centre office precincts of Macquarie Park and Parramatta. This is due to an ongoing undersupply and pent up demand in these markets (evidenced by strong take-up and low vacancy rates), uplifts in planning controls facilitating superior development outcomes (particularly in Parramatta), a preference from particularly large scale corporate and government tenants to be located within these key centres, financial feasibility considerations, superior accessibility based on current and future public transport infrastructure, site availability and retail /lifestyle amenity offered in these major precincts. Although there are land limitations in Rhodes, the area enjoys few of the same marketable features as these core precincts. - The majority of new development proposed in the nearby centres of Sydney Olympic Park and Macquarie Park will be in the form of low to medium rise campus style office buildings featuring large scale floorplates of between 2,000 – 3,000 sq.m. It is this scale / configuration that is most sought after in the market (particularly by corporate entities) and remains a focus for developers. Our understanding is that based on the size and configuration of the subject property, much smaller floorplates of up to 1,500 sq.m. can be accommodated and a high rise structure would be required. As such, provision of floorplates this size would considerably limit demand, rental potential and add substantially to construction cost compared with a typical lower rise campus style building offering a similar floor area. - From a market standpoint it is not considered commercially appropriate to accommodate all proposed commercial office space within one property given the proposed scale far exceeds all other office space throughout the area and user profiles / requirements. A more practical and sound approach would be to locate appropriate scale office accommodation over multiple sites or on sites capable of supporting campus style office buildings with large floorplates as is most sought in the market. The main opportunity with regards to the latter is the Hewlett Packard site at 410 Concord Road which has the scale to support a campus style facility similar in context to Rhodes Corporate Centre. In addition there may be potential to accommodate more market appropriate size and scale office development north of the subject where there is greater width between Concord Road and Blaxland Road.

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- There is considered additional opportunity to provide office development on additional sites in close proximity to the station. Most appropriately this could include a logical northern extension of the offices located at 3 and 5 Rider Boulevard on the land at 2 – 34 Walker Street. This land forms part of the revised Rhodes East Precinct and is considered very well suited to accommodate appropriate scale office buildings. Such developments could potentially form part of mixed use developments and would reduce the burden of a single site needing to provide an uncharacteristically large office development in isolation. - With specific regard to the subject property, there are potential limitations to staging an office development on the property given the relatively modest size and elongated configuration of the site for such a considerable scale development. As such, subject to a massing exercise and architect / design review, the development would most likely need to be undertaken in a single stage. Given funding requirements from lenders for pre-commitments (and potential difficulties in obtaining finance should pre-commitments not be obtained), the large scale of the project high-rise configuration, the considerable financial outlay to construct a high-rise suburban office building (typically circa 30 - 40% premium over more typical low rise campus style developments) plus the location within a non-core office precinct, the financial feasibility of such a project is considered to be in question. - From a broader context, there is considered ample capacity to achieve the 2036 proposed employment targets which have been established for the entire Rhodes peninsula (along with the 1,200 jobs within Rhodes East). In addition to providing jobs within a proposed facility on the subject property, this is based on identified employment opportunities in the area, including the expansion of Concord Hospital, future employment at the Rhodes Corporate Park and future redevelopment of the Hewlett Packard site. In addition to this, other employment generating opportunities will be in the form of a new school, retail and alternate commercial opportunities. - Based on the additional opportunities to achieve job targets in the area and with consideration to market factors, a 40,000 sq.m. high rise office building with floorplates of circa 1,500 sq.m. is not considered viable for the subject property in Rhodes. Any development of this size is considered too large for a suburban office hub and would offer extensive new supply with very limited demand based on configuration with small floorplates and low parking provision. As such, financial feasibility of a project with these characteristics would be in question. - Further to the above, additional broader considerations for success of a large scale standalone office building in Rhodes - With limited availability for larger contiguous space in Rhodes Corporate Park, demand tends to emanate from small scale office users occupying suites of less than 1,000 sq.m. in Rhodes. Many of these include allied health services and professional businesses. Although there are some regional offices located in the area, Rhodes has not traditionally been a preferred office location for many large corporates who have opted to locate in more recognised and superior office precincts. As such, it may prove difficult to generate appropriate lease interest in a large scale commercial project unless campus style accommodation offering floorplates of between 2,000 – 3,000 sq.m. is provided (similar to Rhodes Corporate Park). The subject property does not have the physical capacity to provide similar size floorplates being limited to a potential maximum size of 1,500 sq.m. - Many larger scale users have taken up space in Parramatta over the past 2 – 3 year period including NSW Government Departments such as the Department of Education & Communities and Western Sydney University. It is considered unlikely that such users would consider or be drawn to a non-core location such as Rhodes to house company headquarters. Once again, this brings into question the proposed scale and financial feasibility of a proposed high rise office development on the subject property given only below average scale floorplates can be provided. - Vacant office space in Rhodes is generally fragmented between various buildings, suites and floors given the tenancy profile of the area. Should a large scale development be undertaken on a single property and tenants requiring a considerable lettable area not be secured, it would be likely that the space would need to be divided into a considerable number of smaller scale tenancies thus replicating current vacancy patterns. - Ample parking provision is still an expectation for many corporate office users (even when public transport is locally accessible). The proposed commercial parking rate of a maximum 1 space per 150 sq.m. of GFA will provide considerably less car spaces for office tenancies in Rhodes and is anticipated to be a factor further detracting from marketability to tenants. Other office buildings in Rhodes and the nearby locations of Sydney Olympic Park and Macquarie Park currently offer between to 2 - 3 times the quantum of parking. The modest provision of parking in Rhodes will significantly reduce demand from prospective office tenants.

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Contact Details.

Melbourne Level 19/8 Exhibition Street Melbourne VIC 3000 T +61 (0) 3 8102 8888

Sydney Level 25/52 Martin Place Sydney NSW 2000 T +61 (0) 2 8228 7888

Brisbane Level 32/123 Eagle Street Brisbane QLD 4000 E [email protected]

Singapore Level 24-01, CapitaGreen 138 Market Street Singapore 048946 E [email protected]

Charter Keck Cramer Pty Ltd ABN 78618794853

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Brendan Woolley Associate Director

T +61 (0) 2 8228 7860 M +61 (0) 4 26 269 365 E [email protected]

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