Colliers International have transacted close to $178.5m worth of Office Middle Market assets across Sydney and Canberra in the past two weeks via on-market and private placement sales. In these unprecedented times, Colliers have tapped into unplaced capital and witnessed strong demand for office middle market assets in CBD and metro locations.
Matthew Meynell, Head of Investment Services Australia said, “It’s become apparent that property is relatively more attractive than cash or equities and our recent campaigns have displayed a level of confidence in this asset class amidst the current market conditions.”
Vince Kernahan, National Director, Sydney CBD Sales, recently transacted the only Sydney CBD “On Market” office asset to sell in 2020. The sales campaign for 191 Thomas Street ran throughout the COVID-19 outbreak, but nonetheless generated significant interest from both onshore and offshore buyers. The property sold for $80.08m to an offshore syndicate at a record yield of 3.44% and rate per square metre of $16,694.
Vince said, “We took the property to the market at a time when COVID-19 had hit China but had not travelled internationally. The "on market" campaign ran for 5 weeks, during which COVID-19 became a real threat internationally and we wondered how the "offshore" buyers would react”. The Expressions of Interest for 191 Thomas Street were due approx. 3 weeks after Australia had effectively closed its borders. But despite this we received 13 offers including 6 from offshore groups. Strong demand continues from within Australia and offshore, particularly Asia. The underbidders on 191 Thomas St alone account for $825M of unsatisfied capital waiting to invest”.
Another recent on-market sale was the Leichhardt Collection, a sale and lease back on behalf of Best and Less which received an overwhelming 144 enquiries and 16 formal offers totalling $384,457,000.
James Cowan and Matthew Meynell, Head of Investment Services Australia brokered the sale. The property transacted at $29,000,000 at a passing initial yield of 4.63% which leaves more than $350,000,000 of unplaced capital for middle markets office and warehouse accommodation in this market.”
“The middle markets asset class proposes excellent returns & growth potential to investors seeking secure and strong growth. The space becomes more enticing in the current volatile economic climate because of the security of the assets and their growth potential when investors focus on unlocking entrapped value.”
This is being seen across all Australian capital cities in both the CBD and fringe/metro office markets; however, the geographic trend becomes most obvious when comparing the tight CBD office market to the Metro Markets nationally.
Matthew Winter, Director of Colliers International Canberra said “the sale of 1 Thynne Street, Bruce, ACT to Kordamentha Property Fund for ~$39.3m at an initial yield of 6.25%, is indicative of this trend. With Fixed annual rental reviews of 3.00% p.a and a WALE of 9+ years, it presents strong income growth which is attractive to both domestic and off-shore groups .”
388-390 Sussex Street Sydney, the Transport Workers’ Union of NSW building was sold by Joseph Lin and Steam Leung of the Asia Markets business by private placement for $29m.
“Given its prime location in Haymarket and rarity of this type of stock, 388-390 Sussex Street received multiple competitive offers; predominantly from Asian high-net-worth investors with a clear intention of taking advantage of low interest rates and the weak Australian dollar,” said Joseph Lin, National Director Asian Markets at Colliers International.
Matthew Meynell said “ we are certainly in uncharted waters when it comes to predicting the impacts of the Coronavirus but uncertainty provides opportunity and we have seen a material increase in enquires and if you look at our four very recent office middle markets sales there is $1.5 billion of unplaced capital and 36 parties who were unsuccessful in executing their acquisition strategies.”