This article is from the Australian Property Journal archive
A NINE-level office building and an adjoining DA-approved vacant site in Sydney’s Lane Cove Business Park have sold for a combined $56.6 million, as investors continue to eye off the north shore market.
The 18-20 Orion Road property has a 9,250 sqm tower built in 1991 and sold 88% leased with a 2.48-year WALE. Tenants include Motorola, Netcomm Wireless and Dental Corporation (BUPA), and a 500 sqm childcare facility with dual street frontages. It has a readily subdivisible floorplate of 1,100 sqm with a central core, and includes 342 car parks that are mostly covered over three basement levels, and a NABERS rating of 3.0 stars.
The adjoining 14-16 Orion Road site of 7,922 sqm sold with approval for a commercial development of 15,800 sqm.
Knight Frank’s Angus Klem, Arland Domingo and Dominic Ong negotiated the sale on behalf of private company Develco.
Klem said the new owners would benefit from the long-term investment as well as the increased tenant demand in the Lane Cove precinct.
“This is an outstanding investment opportunity for an almost fully leased office building with development upside. With excellent tenant retention and average rents at $296 per sqm net, which compare favourably with the surrounding markets of Macquarie Park, North Ryde and Chatswood, it offers secure return on investment.
“Rising rents are forcing pushing tenants out of the CBD and North Sydney into the outer suburbs, the development potential offers investors the opportunity to capitalise on future demand,” Klem said.
The north shore and Macquarie Park office markets have seen stock withdrawals of 57,428 sqm over the 12 months to July, and with a further 126,907 sqm of secondary stock taken from Sydney’s CBD, the average net effective rent in the suburban North market, including Lane Cove, has increased by 11.18% over the past 12 months.
The north shore and northern beaches region is expected to benefit from some $27 billion of infrastructure projects.
JLL research this week showed private investors had acquired around $356 million of commercial office assets in North Sydney, St Leonards and Chatswood in the first three quarters of 2017, compared to the full year 2016 figure of $200 million.
Dylan McEvoy, JLL associate director, sales and investments – NSW, said there had been a surge in interest from high net worth private investor families looking to purchase boutique and manageable office buildings in north shore locations.
“Investment activity is incredibly strong as investors want to be part of the Lower North Shore markets and capitalise on the growth that may be generated from the infrastructure investment and zoning changes.
Cushman & Wakefield research analyst Rhys Byrne this week said that over the long-term, transport infrastructure is expected to make the north shore both more accessible and more attractive to prospective tenants, with the quality of office stock, particularly in North Sydney, improving rapidly, as well as encouraging more office development.
He said Sydney metropolitan sales volumes are anticipated to remain strong over the next 12 months.
“Yield tightening will continue, although the recently announced Chinese capital controls may slow growth rates. Despite this, there is strong demand from domestic and other foreign investors, all operating in a long-term low interest rate environment,” he added.
According to JLL’s figures, strong average north shore prime yields have compressed by 58 basis points to 6.17% over the 12 months to the September quarter, and average secondary yields by 79 basis points to 6.75%.
Australian Property Journal
