German fund manager Real IS is buying two adjoining office buildings in Surry Hills from private developer Cornerstone Property Group in a $97 million deal, the largest such transaction to date for the inner-city Sydney suburb.
Cornerstone offered the buildings known as Surry Hills House and No. 1 Lacey to the market in June through JLL and IB Property after an extensive refurbishment and in response to unsolicited interest.
Software powerhouse Canva is an anchor tenant. Together, the two buildings on the corner of Kippax and Waterloo streets comprise a total of 6902 square metres of lettable area.
On the buy side, it is the 12th acquistion for Real IS in the local market. For the German fund manager, the property’s exposure to technology tenants and its proximity to Central Station proved to be drawcards.
“Surry Hills House and No. 1 Lacey are undoubtedly some of the best office assets in Surry Hills and we have strong confidence they will continue to perform well into the future,” said Maximillian Kube, director of Real IS Australia.
The vacancy rate in Surry Hills, the home for many tech and media tenants, is 4.4 per cent. The neighbourhood is expected to get a further boost with the development nearby of the Central Technology Precinct opposite Central Station, which will include the $1 billion Atlassian tower, as well as the $2.5 billion Central Place project being pursued by Dexus and Frasers Property Australia.
The German investment platform has more than $16 billion of funds under management, with $1.4 billion of that total parked in Australian assets.
JLL’s Mitch Noonan and James Aroney together with IB Property’s Steffan Ippolito brokered the sale of Surry Hills House and No. 1 Lacey.
“As the largest office investment transaction on record in Surry Hills, together with the depth of bidder participation from offshore and domestic capital sources, this is a real vote of confidence in the outlook for prime office assets in the submarket,” Mr Noonan said.
Sam Brown of K&L Gates acted as legal adviser to Real IS Australia, while Tony D’Agostino of Swaab’s advised Cornerstone.
The flow of commercial property investment outside the central business district itself is increasing. Further afield over the weekend, Singapore’s Ascendas REIT bought an office campus at Sydney’s Macquarie Park from AMP Capital in a $288.9 million deal.
The Singaporeans said they were buying into satellite hubs that are attractive to companies seeking to decentralise from the CBD.
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