Shortage, high demand bolsters office sector

With only a handful of investment-grade office assets available and increasing demand, prices are rising in the Sydney market.

With only a handful of investment-grade office assets available and increasing demand, prices are rising in the Sydney market.

According to agents, Sydney has made a strong start to 2013, with investors buying $582.6 million in office assets in the CBD market and $150.2 million outside the CBD in the first quarter.

The national director of capital markets at CBRE, Josh Cullen, said foreign interest in core assets was driving activity, with an increase in buying expected over the remainder of the year.

He said a range of Australian real estate investment trusts were also back in the market, which was supporting transactional activity.

Some of the recent sales include 115 Bathurst Street to a Chinese developer for $100 million and 9 Castlereagh Street to Charter Hall for $172.5 million.

There is also the pending sale by Investa of the three-tower Centennial Plaza complex at 260-300 Elizabeth Street for more than $300 million to fund manager Invesco on behalf of its institutional clients.

That is being completed by Colliers International's Vince Kernahan, James Quigley and James Barber.

On the sale side, Standard Life group is said to be raising cash through the divestment of assets including its office tower at 16 Spring Street, understood to be worth about $25 million.

Blackstone is looking to sell its 227 Elizabeth Street tower, which is said to be worth up to $150 million.

"The disparity between funding costs and yields will continue to boost the demand for Sydney's office assets over the near term," said Peter Ainge, the associate director of research and consultancy at Cushman & Wakefield.

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