Perth’s slowly recovering office market has received a shot in the arm with Singapore-listed OKP Holdings acquiring a fringe office building from the family of the late construction billionaire Len Buckeridge for $43.5 million.
The property, at 6-8 Bennett Street in East Perth, comprises two adjoining buildings – a four-storey building and an A-grade nine-storey building – as well as a multi-storey car park offering 10,219 square metres of office space, of which 68 per cent is occupied by a mix of government and corporate tenants with a weighted average lease expiry of just over six years.
Bringing in almost $3 million in annual rent it sold on a passing yield of around 7 per cent
Fully leased the yield would be just under 10 per cent, highlighting the return premium on offer in Perth relative to Sydney and Melbourne (where yields on premium and A-grade asset have dipped below 5 per cent) for those investors betting on a recovery in what still remains the country’s weakest major capital city office market.
The latest Property Council Office Market Report had the Perth office vacancy rate improving to 19.8 per cent from 21.1 per cent over the past six months to January with the PCA taking the view that Perth has “turned the corner” with positive demand for new office space returning after “five difficult years”.
This is also the view of OKP Holdings, an infrastructure and civil engineering company that has expanded into property investment and development. The acquisition in Perth is its first overseas investment.
“We see good upside potential in raising occupancy as we expect demand for offices in Perth CBD to continue to improve over the medium term, given the limited new office supply and strong demand for good quality office space, as well as rising activity in the mining sector which is a major employment driver for the city,” said OKP’s group managing director Mr Or Toh Wat.
The property at 6-8 Bennetts Lane was put up for sale in November by Sam and Andrew Buckeridge with a price tag of around $50 million through Knight Frank and JLL.
They are the sons of the late Financial Review Rich Lister Len Buckeridge, who founded construction company BGC. He died in 2014 worth an estimated $2.1 billion. The brothers became owners of the property in July last year for zero dollars, according to Landgate records.
Both are directors of BGC, which is one of Australia’s largest private companies with annual turnover in excess of $3 billion.