Blackstone swoops on $925m office as leases show signs of comebackAMP Capital has signed a lease with the ATO at 255 George Street, Sydney.

Blackstone swoops on $925m office as leases show signs of comeback

Private equity giant Blackstone has swooped on a half share in the Sydney Grosvenor Place tower, paying $925 million and giving heart to office property investors that the sector is coming back to life.

Fuelling that trend is a major lease signed by the Australian Taxation Office at the 255 George Street tower, which is owned by the AMP-managed wholesale office fund (AWOF). It sits near the Harry Seidler designed Grosvenor Place tower at 225 George Street.

The ATO has signed up 13,000 square metres across nine floors over a 10-year term, taking the tower to 99 per cent occupancy. It is undergoing a $70 million refurbishment to include wellness features in the post COVID-19 work environment.

AMP Capital global head of real estate Kylie O’Connor said the Sydney ATO lease is another indication of the “overstated impact of work from home flexibility on high-quality office spaces”.

“Based on previous market cycles, Sydney and Melbourne CBDs recorded an average increase in occupied space of 5.6 per cent and 5.5 per cent respectively over the two years following a major downturn,” she said.

“We are expecting the office to bounce back strongly post this latest lockdown.”

In Melbourne, where increased supply has weighed on vacancy rates, new deals are also being signed as landlords anticipate improving market conditions. In a new deal, Officeworks will move its national headquarters to the Vicinity Centre Chadstone office precinct.

Under the sale, Blackstone has bought a half share in Grosvenor Place comprising a 25 per cent stake owned by Dexus and a 25 per cent interest owned by the Dexus Office Partnership, in which Dexus holds a 50 per cent interest. The Dexus share of the sale equated to $694 million.

Originally, the Chinese sovereign fund CIC was in due diligence to buy the Dexus stake, but after a series of issues in China and rising tension with Australia, the fund walked away. CIC still has a 25 per cent stake in the tower, with expectations it will sell it to Blackstone.

Blackstone had been an underbidder for the landmark tower and settled on the deal late on Thursday. It comes as the acquisitive private equity group is also bidding for James Packer’s Crown resorts.

For Dexus, the sale is part of its ongoing strategy to sell around $1.3 billion of office assets and late last month it sold its 383-395 Kent Street, Sydney tower to the Charter Hall-managed wholesale prime office fund (CPOF) for $385 million, being a 1.3 per cent premium to June 2021 book value on a passing yield of 5 per cent.

Amid the capital injection into the hard-hit office sector are a swathe of new leasing deals.

In Melbourne, a Flinders Street office tower occupied by Victoria University has sold to a joint-venture partnership for $80.8 million.

Sydney-based fund manager Marprop and Futuro Capital teamed up to snare the 21-storey building at 300 Flinders Street that is leased to the university until October next year when it will move to a new $400 million campus on Queen Street developed by industry super fund ISPT.

The building was offloaded by Singapore-listed entity Hotel Grand Central in a deal negotiated by Colliers International’s Oliver Hay and Matt Stagg.

The transaction was the second in a month for Marprop after it signed a $315 million agreement in October to buy the Sofitel Sydney Wentworth Hotel, the city’s largest single hotel transaction since 2015.

The Officeworks lease at Chadstone will cover 8000 square metres and will take the tower to full occupancy.

Vicinity chief development officer Carolyn Viney said Officeworks adds to the growing list of corporates setting up office at Chadstone.

“Demand for office space outside Melbourne’s CBD remains high with the ‘work near home’ model proving popular as employers and employees look for locations that deliver the best in work-life balance,” she said.

Rob Joyes, national director of Colliers and Tim Farley, national director of Colliers Tenant Advisory, advised Officeworks on the lease.

The lease deals are supported by the latest Office Occupancy survey by the Property Council of Australia, which showed that the number of Sydneysiders working in the office tripled last month.

Property Council’s NSW executive director Luke Achterstraat said the survey revealed positive signs for Sydney’s CBD with the office occupancy levels increasing from 8 per cent to 23 per cent in November.

“With lockdown restrictions lifting, and a festive summer ahead, there is optimism that these numbers will continue to rise and our economic recovery will remain strong,” Mr Achterstraat said.

Melbourne’s office occupancy jumped from 4 per cent to 12 per cent, the survey revealed.

Property Council of Australia chief executive Ken Morrison said that while the increases were coming off lockdown lows, the figures were heartening.

“We know COVID-19 and successive lockdowns left our major CBDs deserted, so it’s good news, even at this traditionally slower time of year, that people are heading back to their places of work,” Mr Morrison said.

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