This article is from the Australian Property Journal archive
INVESTMENT group BlackRock is looking to offload the 151 Pirie Street office building overlooking Hindmarsh Square, little more than two years after acquiring the Adelaide home of KPMG.
BlackRock paid $92.5 million for the building, which has received $7 million worth of upgrades, to Adelaide businessman Viv Padman. Padman had paid about $72 million for the property to German fund manager Real I.S. in 2014.
151 Pirie Street presents the next test of CBD markets. Investors have been backing a rebound of the cities in Brisbane, Melbourne and Sydney of late.
Situated in the core of Adelaide’s CBD, the 12,434 sqm building can boast only two occupiers having relocated since the building was developed in 2006, with the vacancy absorbed on both occasions by sitting tenant expansions.
Three government entities account for 38% of the asset’s net lettable area, including a new 10-year lease to the South Australian government for over a quarter of the building, while professional services firm KPMG occupies the top three floors, with health fund Bupa, Aussie Home Loans and building managers, CBRE also among the tenants.
Over the past two years, recommitments in the building have included Aussie Home Loans and Super SA into their new ground floor tenancies, Super SA into level two and Design Inc into their new tenancy on level five.
“The current owner’s leasing and capital expenditure strategies for 151 Pirie Street have positioned the asset perfectly to meet the future tenant demands of the post-pandemic workplace and ride through the current Adelaide development cycle,” said CBRE’s Alistair Laycock, who is marketing the property with colleague Ian Thomas. They had also negotiated the sale to BlackRock.
The upgrades include new end-of-trip facilities and multiple floor refurbishments, and the tower has a current 5.5 Star NABERS rating.
Strong domestic and offshore buyer interest is expected. Adelaide’s office market has outperformed most Australian capital markets throughout the COVID-19 pandemic, and was the only CBD market nationally to record positive net effective rental growth in 2021. Its office occupancy jumped from 11% to 47% over February, according to the Property Council. The city’s relative success in staving off COVID outbreaks has kept feet under desks at higher rate.
“Adelaide’s CBD office market offers investors a significant yield premium on many other markets across Australia and provides genuine value, given the limited impact that COVID-19 has had on the city coupled with a positive outlook for the state economy,” Thomas said.
“The vacancy rate for new generation office towers in the Adelaide core is around 1%, which is below pre-COVID levels and one of the lowest in Australia, while the overall prime city vacancy has dropped to a nine-year low of 10.6%.”
The city’s case has also been helped growth in the health and medical research industries and the emergence of defence, innovation and cyber security, and the state economy benefitting from the best net migration figures in three decades.
Expressions of Interest close 6th April.
