Lendlease, Charter Hall race for Sydney’s next big (office) thing
Property developer Lendlease has emerged among the frontrunners to take over Sydney’s next big CBD project, in what could become one of the country’s tallest office towers yet and is being eyed as a potential new headquarters for Westpac.
Bidding for the development, known as the O’Connell Precinct, has reached the final stages, pitting Lendlease against other top developers including its ASX-listed peer, fund manager Charter Hall which is also making a strong play. A result is expected as early as next week.
The intensity of interest in the opportunity to develop the 309-metre-high tower proposal, along with the 155,000 square metres of mostly office space across the overall precinct, is testament to developers’ confidence that Sydney’s office market is in the early stages of recovery.
It is also shaping as a test of Lendlease’s efforts to restore its battered fortunes as it pursues a wide-ranging overhaul of business. Led by chief executive Tony Lombardo, the company has been selling off much of its global property book in order to focus on more profitable opportunities at home.
The opportunity in the O’Connell Precinct – in the financial district of the Sydney CBD – was set in motion after one of the co-owners of the site, Middle Eastern sovereign fund, the Abu Dhabi Investment Authority, flagged its wish to sell out. The JLL and CBRE agencies have been handling the process.
The site’s co-owner is Lendlease’s own flagship unlisted office fund, known as APPF Commercial. Lendlease remains in control over the fund, after last month seeing off an attempt by major investors including Hostplus to replace it as fund manager with Mirvac at two of its other APPF vehicles.
In a further twist, Lendlease has thrown itself into the bidding for the O’Connell site, effectively offering to take up ADIA’s interest alongside the APPF Commercial fund it manages.
The O’Connell Precinct is bounded by Spring, Bent and O’Connell Streets. Along with a tower at 1 O’Connell Street, the site’s co-owners amalgamated a series of properties within the precinct. Under their proposal, a second 72-storey tower would be built in the precinct.
Adding weight to the O’Connell opportunity is the interest in the new tower from the city’s bluechip corporate tenants. After a slowdown in construction during the post-pandemic period, the city’s top tenants are in a race for space in the buildings with best-in-class amenity in order to attract and retain workforce talent.
Among them is Westpac which is in the market for 100,000 square metres of office space. The O’Connell Precinct is one of three sites the bank is understood to be considering.
“Last year Westpac engaged Jones Lang LaSalle (JLL) to conduct a request for proposal (RFP) process to accommodate the Group’s Sydney operations from 2030 and beyond,” a Westpac spokesperson said on Wednesday.
“While we have a shortlist of preferred options, no decisions have been made and negotiations are ongoing.”
The O’Connell Precinct is among the next generation of landmarks for the Sydney CBD. Nearby, Dexus is pursuing a 70-storey office tower project in the Pitt and Bridge Street precinct, while Lendlease and Mirvac have teamed up on the over-station development above the new Hunter Street metro station. Charter Hall is building a $1.7 billion new tower, Chifley South, next to an existing tower.
As the market recovers, major investment plays are underway too. Last month, GPT bought an $860 million half share in Sydney’s Grosvenor Place, one of the city’s best-known corporate addresses.
In coming weeks, decisions on a series of other major interests across the CBD are also likely to be resolved including the $900 million half-stake in Salesforce Tower that its co-owner China’s Ping An Real Estate has put to the market.
Also expected to be finalised soon are buyers for Brookfield’s office tower at 680 George Street in the CBD and for 100 Mount Street, a North Sydney office block which is jointly owned by Dexus and one of its funds.
