This article is from the Australian Property Journal archive
OFFICE market investment activity is ramping up for 2022, with about $800 million worth of assets in Brisbane and Melbourne hitting the market this week.
In the Brisbane CBD, JP Morgan is hoping for in excess of $300 million from the Queensland government-occupied prime-grade office tower 53 Albert Street, less than four years after it picked up the 22-storey building for $250 million from Challenger.
The state government occupies all 12 floors of office space, spanning 18,694 sqm of floor area, on a lease running to January 2028. The building was a weighted average lease expiry of 6.5 years by income.
53 Albert Street occupies a 2,322 sqm corner straddling the city’s financial core and government precinct.
Among Brisbane’s $12 billion of major infrastructure projects are the Cross River Rail Albert Street Station across the road – set to be used by 67,000 people each day – and the Queen’s Wharf development within 250 metres.
Below the offices are nine levels and 531 bays of car parking leased by First Parking until October 2030, and 365 sqm of ground floor retail space is occupied by Budget Car Rentals, Avis, BWS and café operator Atomic Albert.
CBRE’s Bruce Baker, Flint Davidson and Stuart McCann are managing expressions of interest campaign that closes 31st March.
“With limited opportunities around the country to acquire 100% stakes in new generation, prime-grade CBD office towers, we expect strong interest in 53 Albert Street from onshore and offshore capital,” Baker said.
The building has a 5.5 Star NABERS Energy Rating and a 4.5 NABERS Water Rating.
CBRE is also marketing a trophy building at 193 North Quay on behalf of Kyko Group with expectations of over $50 million. The 10-level, 7,592 sqm building has 92% occupancy and a WALE of 2.4 years.
Melbourne CBD and suburban buildings up for grabs
In Melbourne, $320 million is anticipated for the 120 Spencer Street office tower after owner CBRE Investment Management undertook a $30 million refurbishment and leasing program.
Located opposite Southern Cross train station, the 23-level, 32,000 sqm tower has a 6.5-year WALE and if 97.5% leased to tenants including WeWork, CQU Australia and Redhill Education, providing an estimated fully let net income of over $17.75 million.
CBRE’s Kiran Pillai, Scott McGlone and Mark Coster along with Cushman and Wakefield’s Nick Rathgeber, Leigh Melbourne and Josh Cullen are managing the sale.
Coster expects buyers from Asia, North America and Australia to show interest.
There are opportunities to add further upside through activation of the ground floor lobby and retail offerings.
“The security of income that 120 Spencer Street provides creates a somewhat unique opportunity for investors with most of the available Melbourne assets last year offering much shorter lease durations,” Rathgeber said.
Expressions of interest close 7th March.
In the south eastern suburbs, the Grollo family is offloading an eight level A-grade Dandenong building leased to the Victorian state government.
Interest for 165-169 Thomas Street is expected above the $170 million mark.
The Grollo family last year sold another state government tenanted building, in the western suburb of Footscray, for $224 million.
Built for the Victorian government in 2011, the Dandenong property has a total net lettable area of 15,070 sqm and is on 2,502 sqm of land. The current lease to the Finance Department is in place until 2032 and increases annually by 3.50%.
Paul Kempton and Trent Preece of Knight Frank are handling the expressions of interest campaign, which runs to 30th March.
Kempton said the strong tenant covenant would be one of the biggest drawcards for investors, with interest expected from major domestic and offshore institutional buyers along with local based syndicators
“This is the first government long-leased office investment in Melbourne to be offered to the market in 30 years.”
He said Dandenong has one of the lowest office vacancy rates in Melbourne as tenants increasingly move to non-CBD locations.
Office asset demand held up better than predicted during 2021. The year rounded out with a solid final quarter of just under $4 billion worth of assets changing hands, bringing the total sales volume to $13.62 billion for the year – 37.2% above the 15-year average, according to Colliers.
