Cbus Property leads the charge in as Brisbane office race takes flight

Artist impressions of $660m office tower being built at 205 North Quay, Brisbane by Cbus Property and Nielson Properties.

Brisbane’s office market is heading towards about $2bn worth of deals as the year gets underway with the powerhouse Cbus Property set to take full control of a new $660m skyscraper in the city’s North Quarter.

The move is a sign of its confidence in the project, in which it already has a half-stake alongside local developer Nielson Properties, and of its commitment to the Queensland capital as it is rocked by the collapse of Probuild and problems besetting Condev.

The travails of the residential-­focused builders, as their supply chains are squeezed and the pandemic pushes them to the brink as costs rise and deadlines blow out, could play into the hands of existing office projects.

They have managed to avoid much of the storm in the city, with tenants continuing to take up space and capital chasing the development stock hitting the market.

Just last month property funds group Charter Hall teamed with Canadian pension fund PSP Investments to secure a $375m office tower anchored by Urban Utilities that is being built in Fortitude Valley.

The turmoil in the construction sector could also play into the hands of existing assets, with the cost of new complexes to rise with fewer builders in the market and the economic rents required to make projects stack up increasing.

Nielson Properties’ offer of a half interest in the under-construction 205 North Quay was keenly bid, with international and local players chasing the stake before co-owner Cbus Property moved to exercise its bidding rights.

A mooted deal would see the “as complete” interest change hands on a capitalisation rate of about 4.5 per cent – one of the tightest ever benchmarks for the city on the complex slated to be finished in 2024.

The superannuation fund-backed developer is certainly not alone in chasing Brisbane office stock, with eight bidders for Cromwell Property Group’s Energex House being whittled down to a contest of two that could see it break the $360m mark.  Nielson Properties put its half-stake in the Brisbane office tower on the block last November after it was locked in as the new home of about 4000 federal public servants.

The 10-year leasing deal with federal government agency Services Australia, which was previously the Department of Human Services, is the largest office precommitment since the pandemic struck.

The agency has gone to market seeking 35,000sq m to 38,000sq m of space.

JLL’s Paul Noonan, Seb Turnbull and Kate Low are handling the offer of the interest in 205 North Quay but declined to comment, as did the ­parties.

Building problems on Cbus Property‘s luxurious $375m unit tower at 443 Queen Street contributed to the collapse of Probuild, but the superannuation fund has a successful record in Brisbane, including the development of 1 William Street.

But Cbus Property is working on options for the site, and has billed the North Quay project as a catalyst for activating the North Quarter of Brisbane’s CBD.

The tower is designed by Hassell, New York-based REX, and Brisbane’s Richards & Spence.

It is being built by Hutchinson Builders on a riverside corner in Brisbane’s CBD.

The A-grade tower will comprise 31 levels with 43,700sq m of office space, a wellness floor, and a large open-air public plaza at ground level with retail, dining and an auditorium. It is designed to achieve 6-Star Green Star and 5.5-star NABERS ratings.

Energex House in Newstead also has top green credentials and is anchored by a lease to the Queensland government and Energy Queensland until 2030. Cromwell Property paid $173m for the purpose-built six-storey building before FKP Property completed it in 2010.

Energex House was Queensland’s first 6-star Green Star office building and is among the top core corporate office investments in Australia from an ESG perspective. CBRE’s Bruce Baker, Peter Chapple and Tom Phipps and JLL’s Mr Noonan and Mr Turnbull are handling the sale of the fully leased building, which faces Breakfast Creek Road and Reddacliff Street in the Gasworks Precinct.

Other big deals include Dexus selling 12 Creek Street, the Blue Tower complex, in Brisbane to funds manager Marquette Properties for about $420m.

A Malaysian pension fund also sold 179 Turbot Street, a 26-floor landmark A-grade office building adjoining Suncorp Plaza, to Mercer Alternatives for $150.9m.

Buyers are now chasing Green Square South Tower in Fortitude Valley, which was listed for sale for about $210m by a South Korean group.

Meanwhile, British funds manager M&G Real Estate is also selling HQ South Tower for $140m-plus, and JPMorgan Asset Management is offloading 53 Albert Street in Brisbane’s CBD for more than $300m.

The chase for the big Brisbane prizes is only just beginning.

The city is still thriving despite Probuild’s demise.