Japanese giant exits $1.8b Salesforce Tower, Singapore investor enters

The Singaporean fund’s move comes as major investors gain confidence Sydney’s office market recovery, at least among the top-class towers. As of December, the Salesforce Tower was almost fully leased by tenants, including TikTok and JLL, sitting at a 99.2 per cent occupancy.

OUE REIT described the tower as “one of the most iconic, premium-grade commercial towers on the Sydney skyline”.

“Australia offers a stable economic outlook, supported by strong capital investment flows and resilient demand drivers,” said OUE REIT chief executive Han Khim Siew.

“In Sydney, favourable demographic tailwinds and proactive government planning are expected to further drive long-term office demand.”

CBRE’s Flint Davidson, who brokered the deal with OUE REIT alongside colleagues Stuart McCann and James Parry, said the transaction “reinforces the appeal of Sydney’s core CBD office market, which continues to attract new local and global capital”.

“As Sydney’s newest premium-grade tower, 180 George Street offers high-quality diversified income, compelling rental growth prospects and a premier position in the city’s financial core – attributes which contributed to strong investor interest in the Mitsubishi Estate Asia [MEA] divestment.”

Salesforce Tower has been a prominent barometer of Sydney’s office market. In 2022, the building was valued at $2.2 billion, but following this most recent transaction, it is worth about $1.8 billion – almost 20 per cent less than just four years ago.

Lendlease, the developer and manager of the 55-storey building, bought a 20 per cent stake in the building through its flagship office fund in 2022, which valued the tower at about $2.2 billion at the time.

MEA put its 30 per cent stake in the tower on the market in August 2024, when it was worth about $600 million. It sold down part of its share to Odakyu Electric Railway’s Australian real estate arm in June last year.

Another early backer of the building, Ping An, listed its 50 per cent stake on the market in 2023.

But the only sale to eventuate – aside from OUE REIT’s acquisition this week – was MEA’s sister company, MEC Global Partners Asia, buying a 10 per cent share in March last year.

Reinvesting in residential property

MEA’s divestment of its interest in the Sydney office tower comes as it takes a $193.5 million stake in a luxury project in Brisbane’s West End – the latest example of the Japanese company reinvesting its capital into Australia’s residential property sector.

The investment in the Brisbane apartment project brings MEA into a funding partnership with Queensland-based developer and builder McNab and private capital manager Ray White Capital.

It is the trio’s second collaboration following their joint investment in the $175 million Elements Budds Beach project on the Gold Coast, joining the RWC McNab Residential Living Development Fund Series.

The fund, which was established last year, focuses on fast-tracking apartment projects in south-east Queensland ahead of the Brisbane 2032 Olympic and Paralympic Games.

“The Tannery represents Mitsubishi Estate’s first apartment development project in Brisbane, supporting its continued growth in the Australian market,” said MEA’s head of Australia and executive director, Yosuke Matsunaga.

“The company has announced the development of more than 8000 residences in Australia, across more than 10 apartment projects and additional rental housing initiatives.”

The Tannery will include 81 residences, a mix of two-, three- and four-bedroom apartments, and amenities such as a rooftop pool, outdoor dining areas, a wellness space with a sauna, steam room, hot and cold plunge pools, and an outdoor shower.