TECH companies have taken up the space in Sydney office towers vacated by law firms that have downsized, or moved location, says GPT Group (ASX: GPT) in its interim report.
GPT has secured tenants such as Uber and Amazon in the past year, and Information media and telecommunications tenants now make up 36 per cent of the company's tenants.
Ridesharing tech company Uber will move into two floors at the HSBC building at 580 George Street following a $25 million lobby and retail upgrade. HSBC will move to Barangaroo.
Amazon leased all of the space vacated by Gilbert + Tobin in the Citigroup Centre at 2 Park Street, joining fellow tech company Twitter in the tower. Another law firm, Herbert Smith Freehills vacated 17 floors at the MLC Centre, a space which has been taken up by 28 separate tenants.
"We are seeing further solid demand from the technology sector and smaller tenants for our portfolio," says Matt Faddy, Head of Office and Logistics at GPT.
Of the east coast capitals, Sydney is described as the best performing CBD office market.
"The strong demand for Sydney CBD A and B grade office assets is now flowing through to the premium sector," says Faddy.
Meanwhile, Melbourne is described as having "solid demand", with limited availability of quality office space and limited supply coming into that market in the short term.
Brisbane, however, remains "challenging", Faddy says. "There are some early signs of improving demand and stabilisation in that market." While the company has reduced incentives in Sydney and Melbourne, in Brisbane, "incentives in the Brisbane market remain elevated due to soft tenant demand and recently completed supply".
GPT increased occupancy to 97.3 per cent (compared to 90 per cent in 2013-14), which the company says was driven by the technology sector and continued demand from the smaller tenant market.
The group's interim result showed funder per operations per security growth of 6.1 per cent, with a total return of 14.3 per cent.
The group's statutory profit for the six months to June 30 was $586.4 million (up 39%), with revaluation gains of $380 million over the 12-month period to June 30, generating around 50 per cent of the total return.
GPT is a diversified property group with $18.1 billion in funds under management.
The company's stock was trading down 1.35 per cent at $5.48 per share late this morning.
Get our daily business news
Sign up to our free email news updates.