Charter Hall Group has purchased, on behalf of the government of Singapore’s sovereign wealth fund GIC, an office tower in Brisbane for more than $100 million.
It is the second major purchase by the Singaporeans in Brisbane in less than six months and shows that big institutional money is betting the city’s office leasing market has bottomed out and firmly on a recovery path.
The office vacancy rate in Brisbane is sitting about 15 per cent, which is historically high for the resources-backed city.
The purchase of the landmark 20,000-square-metre building at 343 Albert Street (also referred to as 143 Turbot Street) for $108 million reflects a sharp yield of 6.75 per cent.
CBRE’s Bruce Baker, Flint Davidson and Tom Phipps negotiated the off-market deal on behalf of joint venture owners Amalgamated Property Group and Morris Property Group.
Mr Baker said the Charter Hall deal highlighted that Brisbane was back on the radar for investors seeking counter-cyclical style opportunities.
“Improving economic conditions, strengthening tenant demand and net effective rent growth are underpinning growing local and offshore buyer interest in the Brisbane CBD,” Mr Baker said.
He said the market continued to provide a comparatively attractive yield spread to Sydney and Melbourne.
Charter Hall was awarded a mandate last year to pursue counter-cyclical investment opportunities on behalf of the sovereign fund GIC.
Charter Hall’s fund manager for office partnerships, Trent James, said his team was excited to secure a second Brisbane CBD office investment for the CCT partnership, which extends the portfolio to $450 million.
In December last year the sovereign wealth fund backed partnership purchased the headquarters of takeover target Santos in Brisbane for $370 million. That deal was struck on a 5.7 per cent yield, in what was the largest office deal in the city that year.
“The Brisbane CBD is performing in line with our partnership expectations and we look forward to exploring further opportunities,” Mr James said.
The latest purchase gives the new owner a significant development opportunity with the site of the building having previously been approved for a premium office tower of about 50,000 square metres.
Major tenants – the Department of Human Services and Canstar – recently signed seven-year lease renewals, with the building also occupied by Pragmatic Training and the South East Queensland Office of Lord Mayors.
A spokesperson for the vendor Amalgamated Property Group and Morris Property Group said the two organisations were progressively dealing with their jointly owned assets as each group repositioned their investment and development portfolios in Brisbane, Canberra and the Gold Coast.
Amalgamated has under construction the Civic Quarter in Canberra City – a 20,000-square-metre, premium grade office building – which will add to the group’s burgeoning investment portfolio in Canberra.
While Morris Property Group is targeting other opportunities in the Brisbane CBD, and has also added to its Canberra portfolio, having recently completed the redevelopment of Canberra House, a 10,000-square-metre commercial and retail complex in Canberra City.