This article is from the Australian Property Journal archive
STATE government infrastructure projects and ongoing strength in Sydney’s northern fringe and Parramatta office markets have underpinned a 9.4% valuation uplift across six Australian Unity Office Fund assets, at a total of $42.8 million.
The external valuations equate to an increase of 26 cents per unit in AOF’s net tangible assets, and take the portfolio value to around $620 million, with the weighted average capitalisation rate tightening to 6.7%.
The assets include 5 Eden Park Drive in North Ryde, and 10 Valentine Avenue and 32 Phillip Street in Parramatta, Brisbane properties 150 Charlotte Street and 241 Adelaide Street, and 30 Pirie Street in Adelaide.
AOF said the North Ryde and Parramatta assets generated the majority of the increase, “reflecting the strong investment demand in these metropolitan markets, combined with robust leasing conditions and improving leasing conditions in North Ryde”.
The 5 Eden Park Drive revaluation was supported by occupancy growing from around 83% to circa 93% since December 31. Purpose-built for Contract Pharmaceutical Services Australia in 2004, the 11,021 sqm building has three levels of office space and a modern production and warehouse area. Last week, Cardinal Health Australia leased a 647 sqm office space on level two.
“Significant infrastructure under construction and in planning is making North Ryde and Parramatta an attractive and viable option for tenants by providing improved transit, shopping and education amenity,” AOF’s fund manager Grant Nichols said.
“Despite recent market rental growth, the metropolitan office markets of North Ryde and Parramatta remain cost effective alternatives to the Sydney CBD, with North Ryde market rents being approximately one-third of Sydney CBD rents and Parramatta market rents being approximately half of Sydney CBD rents.
“This significant rent spread, which is higher than the historical average, is another factor driving tenant demand in these markets.”
A recent BIS Oxford Economics report showed forecast the metropolitan vacancy rate to fall below 4.5% by December 2019, with the CBD falling to about 3%. That echoed Knight Frank’s associate director of research Alex Pham’s prediction that the Sydney CBD’s vacancy rate will tighten to 3% over the next three years.
Vacancies at the end of 2017 sat at decade-lows of 5.4% across the metropolitan region and 4.6% in the CBD, BIS Oxford said.
Australian Property Journal
