Superannuation fund Aware strikes Brisbane CBD office deal

Aware Real Estate has bought 145 Ann Street, Brisbane.

Investment giant Aware Super is backing the recovery of the local office sector, picking up a major tower in Brisbane’s CBD from a venture run by heavyweight Dexus for $215.5m.

The group has sealed a deal to buy 145 Ann St that is close to the value at which Dexus and its partner, the Canadian Pension Plan Investment Board, held the building.

The deal is being taken as a sign of confidence in the Queensland capital, which has emerged as one of the most active markets this year, and of the broader recovery in the office sector.

While the overall picture is mixed, particularly for lower grade buildings, Dexus and other large groups have been able to sell off assets, with pricing much closer to the values at which they were held.

However, the value is also well off the peak valuation for the asset of about $295m before the pandemic struck. Office values were also hampered by interest rates jumping, which increased capitalisation rates, which are used as a measure of value.

Brisbane has been one of the more active markets, with buyers also chasing another Dexus asset, AM60, as well as Asian warehousing group ESR selling 133 Mary St.

Aware is showing its desire to pick up office buildings in Australia and in Britain and is targeting top assets in markets that have come off but are showing signs of recovery

Aware said the purchase was its first Queensland real estate acquisition, with the A grade CBD block in Brisbane adding to its $3bn property portfolio, which is overseen by chief executive Michelle McNally.

Sitting in its up-town precinct, the 27-level office tower sports high-grade environmental credentials and amenities including end-of-trip, wellness centre and on-site concierge.

Aware Real Estate head of investment and capital transactions Pete Carstairs said the acquisition was aligned with the fund’s strategy to target office opportunities along the eastern seaboard.

“This asset has cleverly designed floorplates that capture expansive views, is close to public transport and offers tenants high quality amenities,” he said.

“Expanding into the Brisbane office market will also provide ARE geographical exposure to a core eastern seaboard market currently showing growth due to market tailwinds.”

Mr Carstairs said the Brisbane office market performance was strong relative to other Australian and global office markets due to limited supply, a strong tenant demand and declining vacancy rates, which in turn drive effective rental growth.

“Our analysis has identified favourable drivers such as below average A grade market vacancy rates, which lead to a forecast of significant rental growth over the next five years together with a strong state economic outlook,” he said.

He added that interstate migration was driving further demand for office space and was combining with limited capacity of builders to divert from locked-in infrastructure projects to increase built office supply.

Mr Carstairs said one of the key differentiators of 145 Ann St in the Brisbane leasing market was its higher level of sustainability credentials compared to many key peers.

“Environmental credentials are critical for major tenants looking for office spaces that meet their environmental criteria,” he said.

Navigator Property Group provided strategic advice on this acquisition for Aware Real Estate and will support the group as it drives leasing outcomes in what it sees as an improving market.

Navigator managing director Tom Phipps, who advised the superannuation fund on the purchase, said the firm looked forward “to continuing this great relationship as we execute on the strategy for this outstanding asset”.

JLL’s Paul Noonan and Seb Turnbull handled the off-market deal for Dexus.

Mr Noonan said 145 Ann St was an outstanding A grade asset that had historically leased very well.