The opening of the $800 million ANZ Bank Tower at 161 Castlereagh Street comes as office vacancies are heading to double digits, but investment in bricks and mortar is also reaching record highs.
In the second quarter of 2013, direct investment in commercial real estate totalled $6.8 billion, up from $4.1 billion in the first three months of this year.
Dominic Brown, the head of south-east Asia/Australia/New Zealand research at DTZ (a UGL company), said the investment was a 66 per cent increase quarter-on-quarter, but also the strongest quarterly result since the fourth quarter of 2007, which was heavily influenced by merger and acquisition activity.
"The increase in investment activity was not only driven by a greater number of deals, but also by a range of large portfolio transactions," he said. "In reflection of this, transactions in excess of $500 million accounted for $2.8 billion, or 41 per cent of investment, while those between $100 million and $500 million contributed a further $2.4 billion or 36 per cent.
"Consequently, average deal size increased to $82 million in the second quarter 2013, up from the rolling three-year quarterly average of $56 million."
A report from DTZ said office and retail assets continued to be most attractive to investors. This was despite those two sectors having the weaker outlooks post the 2013 reporting season.
Mr Brown said total investment in offices was recorded at $3.9 billion, while the retail sector attracted $2.5 billion of investment over the quarter.
Despite appetite for industrial assets, smaller lot sizes and difficulties in growing scale continue to dampen overall volumes.
The main buyers were the real estate investment trusts, recording more than $1.6 billion.
In the three months, the sales included office portfolios and individual properties by DEXUS Property and Cromwell, Mirvac and Abacus, across Sydney, Perth and Melbourne.
The new home of ANZ, Herbert Smith Freehills and Boston Consulting, the 43-storey tower and the Legion House, at 161 Castlereagh Street through to 242 Pitt Street, is owned by GPT's wholesale office fund, ISPT, and LaSalle.
It was developed by Grocon and designed by architects Francis-Jones Morehen Thorp.
Speaking at the official opening ceremony, NSW Premier Barry O'Farrell and ANZ chief executive Mike Smith said the tower was commissioned and completed through the global financial crisis, and added to the $5 billion of private investment in Sydney city in the past year.