Shortage, high demand bolsters office sector
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.
Frequently Asked Questions about this Article…
Prices are rising because there are only a handful of investment‑grade office assets available while demand is increasing. The article cites strong foreign interest in core assets, a return of Australian REITs to the market, and a gap between funding costs and yields as key factors pushing prices up in Sydney.
According to agents quoted in the article, investors bought $582.6 million in office assets in the Sydney CBD and $150.2 million outside the CBD in the first quarter of 2013.
The article lists several recent and pending sales: 115 Bathurst Street sold to a Chinese developer for $100 million; 9 Castlereagh Street sold to Charter Hall for $172.5 million; and Investa is set to sell the three‑tower Centennial Plaza complex at 260–300 Elizabeth Street for more than $300 million to Invesco for its institutional clients.
The article mentions Standard Life is divesting assets including its office tower at 16 Spring Street (understood to be worth about $25 million), and Blackstone is looking to sell its 227 Elizabeth Street tower, said to be worth up to $150 million.
Foreign buyers are driving activity in core assets, and the article says Australian real estate investment trusts (REITs) have returned to the market, both of which are supporting increased transactional activity and demand for Sydney office assets.
Colliers International agents Vince Kernahan, James Quigley and James Barber are completing the sale of the Centennial Plaza three‑tower complex at 260–300 Elizabeth Street, according to the article.
The article quotes Peter Ainge of Cushman & Wakefield saying the disparity between funding costs and yields will continue to boost demand for Sydney office assets in the near term. In short, when borrowing costs are low relative to the income yields on office buildings, that gap can attract more buyers.
The article suggests the market is becoming more competitive with rising prices and strong institutional and foreign buyer interest. For everyday investors, that environment can mean tighter yields and fewer investment‑grade assets available, and it may influence valuations of property funds and REITs that invest in Sydney offices.
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