Sydney office market experiences $1.5 billion sales rush

Sydney office market experiences $1.5 billion sales rush

22 September 2017

Sydney CBD landlords eager to cash in on rising rents and surging capital values have placed about $1.5 billion of commercial office buildings on the market, reports The Australian.

The latest property to join the mix is a recently renovated B-grade office tower at 160 Sussex street owned by Burcher Property Group that is on the block for $90 million.

The recently upgraded 15-storey building has nearly 8,300 square metres of office space, overlooks Darling Harbour and delivers $4.6 million in net income.

Sydney-based Burcher bought the tower for $51.21m from Aviva Investors in 2015.

The property is strategically situated in the Sydney CBD’s Western Corridor, an area witnessing high net effective rental growth, says Graeme Russell, Director of Capital Transactions at Savills Australia.

“What is happening within the Western Corridor precinct is changing the dynamics of the Sydney CBD,” said Mr Russell.

“New construction worth billions in office, residential, hotel, transport, infrastructure and entertainment developments in the area gives Sydney a new focal point.”

Another former Burcher building up for grabs is 299 Elizabeth Street, which occupies a prime position on the edge of Hyde Park.

The AFR reports that Chinese-backed investors acquired the property just three years ago for $45 million in a potential residential conversion play.

The property comprises 5,974 square metres of net lettable area including the office space and some ground-floor retail.

“299 Elizabeth Street recently received a $1.55 million upgrade and is nearly fully leased—primarily to legal occupiers—due to its close proximity to the Local and District Court within the Downing Centre,” said Savills Andy Hu.

The number of assets in the Sydney market is steadily building with US financial services giant TIAA’s TH Real Estate adding 20 Hunter to the offerings less than a month ago.

According to Savills, the Sydney CBD office market differs from every other market in the country due to its landlocked nature and lack of greenfield development sites.

Vacancies run currently at a low of 5.9 per cent, coupled with expectations of further tightening over the next two years. Meanwhile, rents have shown double digit effective growth over the past two years and risen to record levels.

Knight Frank’s head of Asian markets in Australia, Dominic Ong, said investment demand remains extremely high into the Sydney CBD.

“There remains a lot of capital chasing solid assets in Australia,” he said. “We are expecting interest from local and offshore buyers, including syndicates and high net worth individuals.”