GPT Group and DEXUS Property's lease at The Zenith office tower at Chatswood is an indicator that the non-city markets are inching their way back, according to experts.
Under the latest deal, the joint owners of the property have signed Lend Lease Business Services across more than 3000 square metres at 821 Pacific Highway.
It is owned by the GPT Wholesale Office Fund (GWOF) and DEXUS Property Group and is in the heart of the Chatswood CBD.
GWOF fund manager Martin Ritchie says the other tenants were the Government Property NSW's transport and government property division and the HealthShare NSW group.
Kevin George, the executive general manager, office and industrial at DEXUS, says the deal had resulted in the leasing of almost 10,000 square metres at The Zenith over the past five months, which increased occupancy to above 95 per cent and the weighted average lease expiry to 4.2 years.
The leasing comes as investors are also piling cash into the area.
According to new research, Sydney's North Shore commercial property market is expected to rise further on property investors' radars in 2014, with the region offering diverse investment options after stock shortages in 2013, rising CBD prices and increased levels of capital.
Simon Kasprowicz, CBRE director, capital markets, institutional investments, expects 2014 to be a robust year for transactions and the area has already recorded strong levels of buyer inquiries.
"A shortfall of stock in 2013 created a bottleneck of capital towards the end of the year, which may translate into more activity from owners looking to divest their assets, capitalising on the strong demand increasing in 2014," Kasprowicz says.
Rob Sewell, JLL head of office investments Australia, said the non-CBD sectors were proving to be the better performers for investors and landlords.
"Transaction [sales] volumes in non-CBD markets increased by 58 per cent to $3 billion in 2013, surpassing the $2.46 billion recorded in 2007," Sewell says.
"North Sydney was the most active non-CBD office market. Transaction volumes surpassed $1 billion. To put this in context, the previous high was in 2001 when $509 million traded."
Sewell, who was a co-agent on the sale of 177 Pacific Highway for $413.9 million, said it was the largest single-asset transaction in North Sydney since JLL started reporting transactions in 1987.
Both agents say while leasing remained flat in some areas along the North Shore, recent deals had shown some growth in rents.
The average North Shore office vacancy is about 10 per cent, but the withdrawal of older offices into residential developments was keeping a lid on the empty office space.