Canberra offices back in investor frame
Canberra’s office market is again on the radar of local institutions, which wracked up a busy second half in 2017 after foreign buyers had set the early pace.
In two of the most recent deals, financial services group Challenger swooped on a Childers Square office tower and superannuation fund-backed manager ISPT picked up a complex in Barton in the parliamentary triangle.
Challenger bought the Childers Square complex for $92.15 million on an initial yield of 7.52% from an entity linked to the Morris Property Group, which took full control of the building in 2014 in a $76 million play.
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The six-storey building spanning 15,000sqm at 14 Childers St in the City West precinct was completed in 2009. It has about 20 tenants including BAE Systems, Australian Reinsurance Pool Corporation and National Australia Bank, giving the asset a weighted-average lease expiry of about six years.
ISPT bought the six-storey A-grade complex at 6 National Circuit from the private Doma Group for about $38 million. The 6256sqm office block commands expansive views of Parliament House and the surrounding precincts.
Colliers International brokered both deals but declined to comment on the details. In a research note it says last year was a record for office sales, with $784.7 million in deals above $10 million, well above the five-year annual average of $360 million.
Colliers International national director Tim Mutton said in a recent posting there had been strong inquiry from buyers looking for value compared with the record pricing on towers in Sydney and Melbourne.
“This was particularly in evident in the fourth quarter when approximately $225 million in Canberra office transactions were concluded with Australian institutions,” he said.
A Charter Hall-run fund also bought 44 Sydney Ave for $58.6 million and local companies, including EG Funds Management and Amalgamated Property Group, swooped on four properties in the parliamentary triangle precinct sold by the federal government.
All up, Australian institutions were involved in 10 deals totalling more than $440m, Mr Mutton said.
CBRE managing director, ACT, Michael Heather, says the Canberra office market should again record a solid year of sales volumes, given the strong market fundamentals, an attractive yield spread relative to other cities like Sydney and Melbourne and the positive rental growth outlook in the city.
He says foreign investment flows into Canberra will remain “extremely robust” in the wake of the largest ever recorded net inflow of foreign capital into the city last year.
“This was amplified by Canberra’s biggest ever office sale when South Korea’s Mirae Asset Global Investments acquired 50 Marcus Clarke St for $321 million,” he says
“Investment interest will remain high this year for core-grade buildings with long leases as well as buildings less than 10 years old or that have had major refurbishments,” he says.
The start of two new speculative developments in Canberra’s CBD that will add about 35,000sqm of new space in the 2019-20 is also changing the dynamics of the market, Savills noted.
A further 20,000sqm of space in the CBD and 15,000sqm in Dickson have been pre-committed by the ACT government.
Savills ACT managing director Andrew Stewart says that activity has been spurred by the Korean deal and he sees a place for all forms of capital.
This article originally appeared on www.theaustralian.com.au/property.
