Office Tenants Switching To Landlords Amidst Low Interest Rates

AUSTRALIA – Many office space occupants in the city are looking to become property owners due to the favorable interest rate environment, reported The Sydney Morning Herald on Sunday (20 September).

“The low-interest rate environment is making buying a viable option for many of today’s tenants,” said Vince Kernahan, National Director for investment services at Colliers International.

He and his colleague, Tom O’Neill, came to this conclusion after comparing the cost of renting a whole strata floor in Druitt Street versus acquiring it. They estimated that the cumulative rent will exceed the cost of what would be paid by the owner of the commercial property.

Notably, Kernahan and O’Neill brokered the sale of a 3,500 sqm heritage office building at 19-37 Greek Street, Central for A$43.5 million in 2019. The property was sold to United Workers Union by real estate group Denwol, which originally acquired the property for A$18.7 million in 2016.

Following that pricey office transaction, the duo is currently marketing two commercial properties in Sydney that offer lessees a chance to purchase available office space in a bid to reduce operating costs.

Both properties are located in the western part of Sydney’s Central Business District (CBD).

One of them is an entire strata floor measuring 1,185 sqm at Level 10, 51 Druitt Street. It comes with six parking strata lots that can fit a maximum of 10 vehicles.

“The rarity of 51 Druitt Street is that for an occupant wanting a whole strata floor in excess of 1,000 sqm in the Sydney CBD there are only three buildings in existence,” noted Kernahan, adding that one of the other two is a leasehold property, while a property developer is buying out the remaining stake it does not own in the other.

The second one is a revamped freehold heritage property in 230 Sussex Street that is across the Darling Park office buildings. Spanning around 962 sqm, the commercial property consists of two structures separated by a courtyard. Moreover, it comes with on-site parking spaces.

“Highly attractive heritage buildings are rare and in this case an investor or owner occupier has all of the hard work done and they can take possession immediately,” added Kernahan.

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