Prices Of Huge Office Bldgs Returning To Pre-COVID Levels
AUSTRALIA – Sydney-based Intera Group has purchased an office building along 65 Berry Street in North Sydney for A$212 million, indicating that prices of large offices are recovering to pre-pandemic levels, reported The Australian on Monday (7 December).
The private firm linked with Jet Technologies Founder Albert Malki acquired the Grade A office tower from Charter Hall Office Trust. The two entities have close ties, which led to the off-market transaction that was brokered by Cushman & Wakefield’s Steve Kearney, Mark Hansen, and Josh Cullen.
The acquisition further revitalizes the office property sector, where the prices of premium buildings are holding up even though vacancy levels are increasing and large firms reconsider their office space needs amidst the COVID-19 outbreak.
For Charter Hall Office Trust, the deal is a boon as it managed to dispose the commercial property at a 10 percent premium to its independent valuation on 30 June 2020. The office tower changed hands at a passing initial yield of 5.21 percent, similar to capital values seen before the health crisis.
Property owners ranging from RMIT University, Telstra, Credit Suisse, AMP Capital, and Dexus have divested office buildings during the COVID-19 pandemic. But others like Challenger and Abacus have refrained from divesting assets, indicating that there are fewer buyers as compared to the market peak, although market activity in 2021 is anticipated to be more vibrant.
Charter Hall Group’s new Office CEO Carmel Hourigan said the sale of many office assets beyond their valuations on 30 June 2020 proves that the firm was correct in believing that asset pricing would be resilient.
“The sale of a short-lease asset like 65 Berry Street further reflects the strength in the market for office assets. In an environment of low interest rates, real estate will continue to be an asset class that is well supported into 2021, particularly as our tenant customer office utilisation rates improve nationally,” she noted.
Completed in 1986, the 17-storey 65 Berry Street has an area of 14,500 sq m, meaning it’s a good indicator for the status of the office market by year-end. It was last transacted for A$74.5 million in 2001. And Charter Hall Office Trust obtained the property as part of Charter Hall Office REIT’s privatisation in 2012.
Situated adjacent to an upcoming metro station in North Sydney, the office tower was renovated in early-2019 as part of tenant WPP’s lease renewal and expansion to occupy 70 percent of the property’s area. However, its lease will end by mid-2023 and there’s no option to renew.
Meanwhile, American asset manager Nuveen is selling a 50 percent stake in North Sydney commercial properties, Greenwood Plaza and 101 Miller Street, which are collectively valued around A$500 million. It has appointed Colliers International and Knight Frank to market the assets.
