Charter Hall lodges city skyscraper plan

Artist’s impression of Charter Hall’s plans for an office development at 383 Kent Street in Sydney.

Property funds manager Charter Hall is backing a renaissance of city office towers in the next property cycle and has submitted plans for a 42-storey block in Kent St in Sydney’s central business district.

The group is looking to develop a $1bn-plus office block on the site of an older building and carpark, 383 Kent St, that it picked up from rival Dexus in 2021 for $385m.

The move signals its confidence in the top end of the market, which it argues is supported by a “flight to quality” in offices as large corporate tenants and their employees demand better spaces.

But the tower won’t really get under way until Charter Hall finishes its new $1.8bn Chifley South development which, alongside Mirvac’s 55 Pitt St, is billed as one of Sydney’s only major office developments in this cycle.

The city’s leasing market has held up – particularly at the middle and smaller end – but tenants are demanding both top quality buildings and locations, and large tenant moves have been muted.

Charter Hall plans to replace the existing building and replace it with a 42-storey commercial development with ground floor retail, delivering more than 73,000sq m of new office space.

A report on the proposal revealed that big landlords and the NSW governments are planning a series of new towers, including over-station developments, in the heart of the city, but timing of many projects is expected to be delayed.

The listed company’s $9bn Charter Hall Prime Office Fund acquired the building in 383-395 Kent St in the Sydney CBD on an initial yield of 5.1 per cent, but it had always seen the development potential.

It said the acquisition presented a core Sydney CBD investment opportunity on a large 3600sq m CBD site benefiting from two street frontages.

A company spokeswoman said the move was “consistent with all our active management initiatives”. The proposal covered one of the “very few 4000sq m sites in the CBD to create new-generation accommodation solutions for our customers”.

“In an increasingly bifurcated office market with limited new supply proposed or in development, this application provides a long-term strategic value-add opportunity for us and our customers,” she said.

Recognised as a “tower cluster site” under planning controls, the site allows for long-term development options. The existing buildings include about 18,000sq m of office space plus a multi-level 800-bay public carpark.

Located adjacent to Charter Hall’s 40,000sq m 2 Market Street office complex and situated on a large strategic corner site, it has wide views across Darling Harbour and the CBD.

The site on the western edge of the CBD is in a tower cluster area linking Kent and Sussex streets, 300m away from the Queen Victoria Building and 500m away from Town Hall.

An Ethos Urban planning report said the developer was proposing a “world-leading” tower that will become a new focal point for sustainable commercial development and will redefine the western edge of the Sydney central business district.

It said the existing development on the site was not fit for purpose for the changing office market, calling the proposal an opportunity to revitalise and revolutionise the western edge for city workers.

The building is targeting a 6 Star Green Star Buildings v1.0 rating.