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Total Brisbane CBD office market sales for 2021 have cracked the $1 billion barrier following the $214 million off-market acquisition of 307 Queen St by Fortius Funds Management and PGIM Real Estate.
It is at least the seventh major transaction since January, making Brisbane the most active of Australia’s commercial office markets.
The 25-level tower on the high-profile corner of Creek Street was sold for a large profit by LaSalle Investment Management, which paid $142 million five years ago and recently spent $5 million on upgrades.
The new owners bought it on passing yield of around 6 per cent with 93 per cent occupancy and weighted average lease expiry of 3.5 years.
Fortius chief executive Sam Sproats said he saw the office sector as a buying opportunity.
“As we continue to navigate the pandemic, there is an opportunity to capitalise on the dislocated office sector and find value,” Mr Sproats said.
“We strongly believe that the office sector will remain an intrinsic part of workplace productivity, culture and performance – but the size and shape of these spaces needs to evolve.”
Steve Bulloch, head of Australia for PGIM Real Estate, said Brisbane was an attractive market.
PGIM is already heavily invested in the city. It co-owns a key retail asset bought with Marquette Properties in 2019 for $77 million, and provided $70 million in funding for the Howard Smith Wharves redevelopment.
The US-based investment management firm also owned the office tower at 215 Adelaide Street, which it repositioned and sold for $224 million in 2015.
“The 307 Queen Street asset is well located, has significant amenity and sustainability characteristics, with strong appeal to small and medium-sized tenants,” Mr Bulloch said.
Fortius will manage the asset and is packaging it into a wholesale trust.
Selling agent Justin Bond from Knight Frank said Brisbane offices were trading strongly because buyers were attracted by its relative stability and higher-yields compared with markets such as Sydney.
“The economy has demonstrated its capacity to rebound quickly,” Mr Bond said.
“Investors are looking through the current disruption and anticipating a rapid rebound in economic growth and office market activity once the pandemic abates.”
This year there have been almost $1.2 million in Brisbane CBD office transactions. The biggest was the $285 million Marquette Properties paid for 10 Eagle Street.
Charter Hall Prime Office Fund paid $264 million for the 50 per cent of 275 George St it did not already own and AsheMorgan bought 310 Ann for $210 million.
Other 2021 sales include 299 Adelaide Street ($85 million), 262 Adelaide Street ($19 million) and 545 Queen Street ($117.5 million).
Looking ahead, investors are reportedly circling 444 Queen Street, while the office building at 100 Creek Street and the retail/development site No. 1 Brisbane are also on the market.