This article is from the Australian Property Journal archive
THE Investa Commercial Property Fund and Charter Hall Prime Office Fund have teamed up to buy Clive Palmer’s Brisbane HQ and will jointly undertake a $500 million development, looking to capitalise on the forecast supply-starved office market’s low vacancy environment and rental growth.
The joint venture has acquired a 50% interest in the three separately owned adjoining office buildings at 366, 370 and 380 Queen Street for $53.75 million, and will immediately begin work on securing approval for a 45,000sqm, 40-level A-grade office tower with an end value of $500 million.
The combined 2,147sqm site is positioned on the CBD’s major thoroughfare and currently has a combined net lettable area of around 9,400sqm.
ICPF fund manager, Jason Leong said the Brisbane office market’s net supply outlook is low, due to no significant completions and a pipeline of withdrawals.
“Consequently, vacancy rates are expected to continue to tighten over the coming years,” he said. “The acquisition supports ICPF’s ‘build-to-own’ investment rationale and aligns with the fund strategy of securing assets that deliver diversification and a future pipeline of value-add opportunities, with the potential to leverage development upside over the next cycle.”
Charter Hall’s chief executive officer David Harrison, said that with a limited number of identifiable development sites and a forecast improving office market in Brisbane’s CBD financial district, amalgamating the sites for future development provides superior returns to alternative stabilised asset acquisitions in the market.
Prospects for the Brisbane CBD’s office market have grown increasingly brighter. JLL research shows the market began its recovery in 2015 and has recorded eight successive quarters of net absorption, taking the cyclical peak in vacancy lower than expected.
Prime vacancies in the CBD were at 14.7% at the end of Q1 this year, with secondary at 19.7% for a total of 17.2%. Net absorption in over 2016 was 41,500sqm, nearly double the 20-year average of 21,700sqm.
Whilst its completions in 2016 of 133,200sqm were the third highest on record – including the CBD’s largest asset in 1 William Street – the space had a pre-commitment level of 97.9%.
Brisbane has only 18,400sqm of refurbished stock slated to come online in 2017, at 310 Ann Street, and no new supply until at least late next year with the completion of 300 George Street.
JLL expects the Brisbane CBD to record cumulative prime gross effective rental growth of 17.3% between 2019 and 2022.
CBRE’s Mark Curtin, who negotiated the Queen Street transaction, said increased tenant demand and a significantly more conservative development pipeline over the next two-to-three years should see the prime vacancy rate in Brisbane reach 5% by 2020.
“Positive demand in the CBD is being driven by the re-centralisation, co-working, technology companies and the public sector,”
Knight Frank’s senior director – research QLD, Jennelle Wilson said there is now noticeably greater tenant activity and mobility in 1,000sqm-plus tenants, a sector of the market that had been lacking in activity until recently.
“Upgrading remains a dominant theme in the market whether in terms of building grade (i.e. Qld Treasury 2,830sqm relocating from A to premium) or from the fringe markets into the CBD (Sonic Health Plus 1,247sqm moving and consolidating from Spring Hill to 410 Ann St and Origin Energy-16,250sqm consolidating from Milton to 180 Ann St),” she said. “Further relocation of Fringe tenants into the CBD is expected over the course of 2017 with Allianz (circa-8,000sqm) considering a CBD location.”
The new Queen Street development will feature basement car parking, a podium level with gym and childcare, end-of-trip facilities, retail accommodation, 5 Star Green Star Design and As Built rating, 5 Star NABERS Energy Base Building and a Well Core and Shell Rating.
Australian Property Journal
