jll australia office market investment review apr 2010
TRANSCRIPT
Office Investment Market ReviewJanuary 2009 – March 2010 Australia
2 Jones Lang LaSalle | Office Investment Market Review
A distinct price point was observed in
early 2009. There were no transactions
above AUD 60 million recorded in the
first quarter.
While the level of stock in public on-market
campaigns was low in early 2009, there
were high levels of stock available on
an off-market basis. Institutional owners
were quietly willing to consider offers on
properties across their portfolios with a
view that property fundamentals would
deteriorate and capitalisation rates would
move out further. With this supposed
approaching storm, offshore groups
became more interested in the Australian
property market, thinking that they will
be able to pick up quality property at
distressed prices.
Declining asset values led to a number
of A-REITs approaching (or breaching)
loan covenants. However, successful
The 2009 Australian Office Investment MarketGlobal economic uncertainty and tight
credit conditions continued to cast
a shadow over the Australian office
investment market in 2009. However, the
Australian economy proved to be resilient,
avoiding a technical recession in 1Q09,
followed by three successive quarters of
positive GDP growth (2Q09 to 4Q09).
In the second half of 2009, the improving
economic conditions and relatively solid
office market fundamentals provided
greater confidence to both local and
overseas investors.
The first half of 2009 followed the trend of
2008. Buyers remained cautious, although
low interest rates and higher yields
encouraged activity from private investors
as the projected returns were above
historical benchmarks for office buildings.
Highlightscapital raisings by large A-REITs from
institutional investors generated positive
sentiment in the office sector. It was
estimated that the A-REITs successfully
raised AUD 14 billion in equity capital
in 2009. With these capital raisings, a
number of institutional owners started to
reconsider their positions and pulled their
properties from the market. As the year
progressed, the positive sentiment created
by the recapitalisation of the sector and
the firm market fundamentals started to lift
the shadow that was cast over the office
sector and gave fund managers room to
strategise and reconsider their positions.
In late-2009, the market started to see the
return of the Wholesale and REITs with
increasing number of buy mandates.
In 2009, access to debt financing
remained difficult. While the official
interest rates were at historic lows,
3Jones Lang LaSalle | Office Investment Market Review
financing costs had significantly
increased, with spreads above bond
rates at up to 400 basis points plus
facility fees. The ability to acquire ‘club
debt’ stalled, and many banks’ new loans
facilities for commercial property had
stopped. For those groups that were able
to source debt, the rules had changed.
Banks’ loan-to-value (LVR) ratio and
debt coverage ratios had become more
stringent. Banks were no longer lending
on property or projects that were not solid
opportunities and the ability to acquire
debt above AUD 50 million was scarce.
Jones Lang LaSalle recorded 107 major
(over AUD 5 million) office transactions in
2009, totalling AUD 3.76 billion (Figure 1).
Both the number and value of sales were
comparable to 2008. It is worth noting that
the 2008 figure was inflated by a number
of large transactions earlier that year that
were actually negotiated in 2007 and
settled in 2008, while the 2009 figure did
not include a number of large transactions
that entered due diligence towards the end
of the year.
The average transaction size of AUD
35.12 million remains well below the
figure recorded in 2006 (AUD 45.39
million) and 2007 (AUD 39.75 million).
While the average size of transaction was
comparable in both 1H09 (AUD 34.73
million) and 2H09 (AUD 35.50 million), the
number of transactions increased from 45
to 62 in 2H09.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009$0
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Figure 1: Total Office Transactions
Source: Jones Lang LaSalle
4 Jones Lang LaSalle | Office Investment Market Review
Victoria and Queensland dominated
transaction activity in 2009, accounting
for 27.7% and 21.3% of the total value
of transactions recorded. The positive
fundamentals of the Melbourne office
markets and the availability of assets
at the private investor price point were
the main drivers for strong activity
in Victoria. Interestingly, there were
a number of purchases made by
overseas-based private investors, and
a heightened interest from participants
will limited exposure to the Australian
property market. Activity in Queensland
was driven by local private investors, a
number of whom disposed of assets in
the 2006–2007 boom and re-emerged as
active purchasers.
Similar to 2008, there were fewer large
transactions (greater than AUD 100
million). In total, seven assets above AUD
100 million were transacted compared
with an average of 15 per annum between
2003 and 2007. The reduction in larger
transactions and a strategy to dispose of
assets in markets outside of Sydney is part
of the reason for the reduced sales volume
in New South Wales, which accounted
for 19.5% of transactions by value. New
South Wales is seen as a barometer for
the sentiment of the wider market, and
the turnaround in sales from AUD 112
million in 1H09 to AUD 623.5 million over
2H09, coupled with the increased number
of settlements in early 2010 reflects the
increased optimism in Australia.
On average, indicative equivalent yields
appear to have stabilised for prime assets.
Indeed, a number of December 2009
valuations showed capitalisation rate
compression for well-leased prime assets.
1 Early Downturn2 Late Downturn3 Trough4 Early Upturn5 Late Upturn6 Peak
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5
4
1
2
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3May ’92 (2.8) May ’93 (2.9)
Nov ’95 / May ’96 / May ’94 (3.9)Nov ’03 / May ’03 /Nov ’02 / May ’02 / (4.0)
May ’95 / Nov ’94 (4.1)May ’97 / Nov ’97 / May ’98 (4.3)
Nov ’98 (4.9)
May ’99 / May ’01 / Nov ’00 / Nov ’04 / Jun 04 / Nov ’05 / Jun 05 / Nov ’06 (5.0)
Nov ’99 (4.6)May ’00 (4.7)
Nov ’93 (3.2)Nov ’92 (2.7)
May ’91 (2.4)Nov ’91 (2.5)
Nov ’08 (1.4)
Nov ’09 (3.0)
Nov ’01 (6.0)
Figure 2: Total Office Transactions
These figures show the position on the cycle based on the median of responses. Source: Jones Lang LaSalle
In 2010, additional institutional investors
are expected to re-enter the market and
overseas investors will become more
prevalent as it is now clear that distressed
quality core assets will not appear on
the market. Increased competition for
assets, risk premiums above historical
benchmarks, the stabilisation of debt
markets and the prospect of strong
medium-term rental growth could lead
to yield compression by late-2010. With
greater depth to the buyer pool, the total
and average value of transactions is
predicted to increase over the next
12 months.
What has happened so far in 2010?Respondents to the latest Jones Lang
LaSalle Survey of Investor Sentiment
(November 2009) believe that the overall
real estate market is currently at the
bottom of the property cycle (Figure 2).
The shift in investor sentiment has been
rapid from the late upturn stage in 2007, to
an early downturn in 2008. In comparison
the property market downturn of the early
1990s took three years to progress from
the peak (1990) to the trough (1993).
With investors believing that the bottom of
the cycle has occurred, transaction activity
improved in late 2009 and a number of
properties have reached settlement in the
first part of 2010.
With the Sydney CBD office market at
the trough in terms of effective rents and
the peak for equivalent yields, investors
have looked to capitalise on the bottom
of the cycle. There were five recorded
transactions in the Sydney CBD totalling
AUD 944.1 million. The largest transaction
to complete in 2010 was the NPS of
Korea purchase of RBS Tower @ Aurora
Place at 88 Phillip Street, Sydney for
AUD 685 million.
Interestingly, a number of offshore groups
have made their first entry into direct real
estate in Australia. K-REIT purchased a
50% stake in 275 George Street, Brisbane
for AUD 166.0 million, while Aviva
Investors purchased 80 Clarence Street,
Sydney for AUD 29.5 million.
2010 Sales
Property Name Address Suburb Month Sale Price Initial Yield NLA (SQM) Rate ($ per sqm) Vendor Purchaser
New South Wales
RBS Tower @ Aurora Place 88 Phillip Street Sydney Mar-2010 $685,000,000 6.6% 45,328 $14,009 Commonwealth Property Investment Trust NPS
55 Hunter Street 55 Hunter Street Sydney Feb-2010 $106,100,000 ~7.0% 13,622 $7,789 ISPT Core Fund City Freeholds
80 Clarence Street 76-80 Clarence Street Sydney Feb-2010 $29,500,000 8.0% 5,481 $5,382 Oakland Property Holdings Pty Ltd Aviva Investors Asia Pacific Property Funds
8 West Street 8 West Street North Sydney Jan-2010 $19,000,000 10.1% 6,028 $3,094 Becton Office Fund Property Bank Australia & Security Capital Corporation
60 Martin Place (50%) Sydney Feb-2010 $95,000,000 8.0% 27,855 $6,821 Martin Place Property Trust Gwynvill Group
52 Alfred Street Milsons Point Jan-10 $51,000,000 ~8.0% 10,219 $4,991 Colonial Direct Property Investment Fund Lipoma Pty Ltd
107 Mount Street North Sydney Jan-2010 $33,000,000 8.0% 6,201 $5,130 Century Funds Management Undisclosed Private Investor
Victoria
Myer Headquarters 800 Collins Street Docklands Mar-2010 $76,870,000 7.7% 28,676 $5,213 Australian Prime Property Fund SEB Asset Management
1 Spring Street Melbourne Mar-2010 $67,000,000 7.5% 31,776 $4,217 Record Realty Highpoint Property Group
357 Collins Street (Former Stock Exchange House)
357 Collins Street Melbourne Mar-2010 $45,000,000 N/A 21,455 Development Maxicity Australand
383 King Street West Melbourne Jan-2010 $34,000,000 8.1% 12,989 $2,618 Trinity Stapled Trust/Trinty Property Trust Henkell Brothers Australia Pty Ltd
171 Collins Street 171 Collins Street Melbourne Mar-2010 $15,500,000 N/A Development Charter Hall Office REIT CBus Property
Queensland
275 George Street (50%) Brisbane Jan-2010 $166,000,000 7.0% 40,317 $7,952 Charter Hall Core Plus Office Fund K-REIT Asia (Australia) Trust
Navision House 10 Market Street Brisbane Jan-2010 $34,254,000 10.2% 6,850 $4,803 Heathley Diversified Property Fund GDI No. 33 Brisbane Office Trust
South Australia
Hp House 148 Frome Street Adelaide Feb-2010 $17,600,000 5.0% 4,680 $3,761 ISPT Core Fund Local Government Association of South Australia
2010 Major Office Transactions – Q1 (greater than AUD 15 million)
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-5%-4%-3%-2%-1%0%1%2%Annual GDP Growth
6 Jones Lang LaSalle | Office Investment Market Review
The Australian economy avoided a
technical recession in 1Q09 and recorded
positive growth figures in each quarter.
The Economist Intelligence Unit (EIU)
estimate economic growth of 0.9% for
Australia in 2009, making Australia and
Korea the only major advanced economy
(out of 33 countries) to record positive
GDP growth over the calendar year
(Figure 3).
A number of factors have contributed
to the performance of the Australian
economy. The swift policy response
was highlighted by the Reserve Bank of
Australia aggressively cutting the official
cash rate by 425 basis points from
September 2008 (7.25%) to April 2009
(3.00%) and the Federal Government’s
various policy measures, including direct
transfer payments to tax payers and
longer-term investments in infrastructure.
To put the fiscal policy spend in
context, the Federal Government spent
approximately 5.4% of GDP on the various
stimulus measures. This figure was one
of the highest in the OECD, only behind
South Korea (6.1%) and the US (5.6%).
After reaching a low of 3.9% in February
2008, unemployment rose 1.8 percentage
points to 5.7% by March 2009. Job losses
were concentrated in the finance and
insurance and property and business
services sectors, resulting in a rise in
sub-lease availability as major office space
occupiers restructured, consolidated and
released excess space to the market.
From 3Q08 to 2Q09, sub-lease vacancy
increased by 1.6 percentage points to
2.1% of total stock.
Economic Overview
The resilience of the domestic economy
has supported labour markets and the
underlying demand for office space.
Unemployment fluctuated through the
course of the year before tightening
to 5.6% in December 2009 and 5.3%
in February 2010. The unemployment
rate masks the growth in the Australian
workforce, which has increased from
10.79 million in March 2009 to 10.94
million in January 2010.
Business confidence has staged a
recovery in the second half of 2009. The
NAB Business Survey (February 2010)
showed confidence was at an 8-year
high. The majority of corporations are no
longer exploring sub-lease opportunities
Figure 3: Real GDP Growth, Advanced Countries, 2009
Source: EIU
and are willing to retain hidden vacancy in
their real estate portfolios in anticipation
of growth over the next two to three years.
Consequently, sub-lease availability
declined to 1.8% of total stock in 4Q09
and is expected to decline towards the
20-year average (1.1%) through the
course of 2010.
The Australian economy is forecast to
rebound strongly and Access Economics
project growth of 2.5% and 3.5% in
2010 and 2011. As the economic
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y-o-y% Change
Finance & Insurance
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recovery gathers momentum, this will
precipitate an upturn in employment
growth for the key industry sectors
and demand for office space (Figure
4). This recovery is supported by the
strengthening of lead indicators such as
the ANZ Job Advertisements series and
the employment component of the NAB
Business Survey.
While the outlook for the Australian
economy is positive, some negative points
remain. Credit markets are improving,
but the cost of debt as illustrated by
the spread between corporate and
government rates remains high. Overseas,
the Chinese government is tightening
bank lending criteria in response to
overvalued asset prices and excess
capacity in industry sectors, including
steel production, aluminium smelters
and concrete. In the US, unemployment
remains at 10.0% and private sector
demand remains weak.
The economic recovery is reflected by the improvement in conditions across the office markets. Leasing enquiries reached a cyclical low in June 2009 and have staged a remarkable turnaround over the second half of 2009, increasing by between 10% and 50%, depending on the market.
Businesses are increasingly willing to make long-term capital investment decisions, including real estate relocation decisions. The rising level of enquiry is a precursor for increased leasing transactions, which are starting to recover and will improve further in 2010.
Kevin George Head of Leasing – Australia
The Changing Nature of Tenant Sentiment
Figure 4: Employment Growth, Key Industry Sectors
Source: Access Economics
8 Jones Lang LaSalle | Office Investment Market Review
VendorsCapital values fell by an average of 20%
to 30% for prime office assets between
December 2007 and December 2009.
A number of A-REITs approached (or
breached) loan covenants, although
lenders were reluctant to force asset sales
while buildings managed to maintain
high occupancy rates and were cash flow
positive. Refinancing activity continued
with the Reserve Bank of Australia
(Financial Stability Review, September
2009) stating that the larger A-REITs had
successfully refinanced AUD 24 billion
of debt since January 2009. Meanwhile,
commercial mortgage backed securities
markets (CMBS), which traditionally
provided some diversification in funding,
remained all but closed—although real
estate firms have generally been able
to replace this financing facility mainly
through bank loans. Essentially, A-REITs
were able to rollover debt finance,
however the spreads increased.
Whilst they were able to rollover debt
finance, the larger A-REITs were also
successful in raising equity capital to lower
gearing ratios. It is estimated that A-REITs
raised AUD 14 billion in 2009. There was
a disparity with the larger A-REITs with a
quality portfolio of assets more successful
than the smaller A-REITs that were
weighted towards secondary assets.
Consequently, the volume of asset sales
by A-REITs was lower than expected
in 2009. They remained net sellers of
commercial property; however, there was
limited evidence of distressed vendors
even if some were highly motivated.
Review of 2009In 1H09, the groups in the market that had
cash or access to cash, mainly private
and offshore investors, were active.
This was due to the perceived unique
opportunity to acquire good quality assets
across Australia at relatively soft prices.
While little on-market campaigns were
conducted, the number of properties
being discussed off-market was high.
A clear vendor–buyer gap still existed,
however as time went on, this gap
started to close. The narrowing proved
to be short lived. In 2H09, a number of
A-REITs started to withdraw assets (prime
assets in particular) from sale, while
pricing started to firm towards end-2009
– in some instances, above June 2009
valuations. Through the course of 2009,
A-REITs accounted for 11.1% of the total
transactions by value.
The immediate fix of a rights issue was
not readily available to unlisted property
trusts. Hence, the primary strategy for
this sector to deal with refinancing and
covenant issues and in some instances,
to deal with clients’ redemption issues
was to sell assets. In 2009, the unlisted
sector accounted for 48.0% of recorded
transactions (by value).
Developers and property companies were
net sellers in 2009, accounting for 16.6%
of vendors by value. Private investors
continued to be active on both sides of
the ledger and accounted for 7.0% of
transactions by value.
Although offshore investors were net
purchasers of commercial property, a
number of offshore groups reduced
their exposure to the Australian market.
Offshore investors represented 7.2%
of vendors by value. The Grosvenor
Group disposed of 20 Hunter Street,
Sydney for AUD 77 million and 25
Smith Street, Parramatta for AUD 48.4
million; while UK fund manager New
Star Asset Management exited Australia
after the disposal of 414 LaTrobe Street,
Melbourne for AUD 49.5 million.
Although syndicates only accounted
for 3.8% of the vendor type by value, a
number of highly leveraged syndicates
are scheduled to reach maturity over the
next three to four years and further asset
disposals are likely.
PurchasersFollowing on from the re-emergence
of private investors in 2008, this cohort
was the main purchaser type in 2009,
accounting for 37.7% of transactions by
value. Private investors were active in the
sub AUD 60 million price category and
the average price transacted by private
investors was AUD 24.9 million with the
median transaction even lower at AUD
14.5 million. Approximately 36.9% of the
purchasers made by private investors
were in Victoria. These included 215
Spring Street (AUD 59 million) and 414
LaTrobe Street (AUD 49.5 million). In
contrast to other markets where private
purchasers were locally based, a number
of transactions in Melbourne were made
by overseas-based private investors.
Activity from private investors was strong
in Queensland, accounting for 8.6% of
total purchases or AUD 322.8 million,
including the HSBC Building at 300 Queen
Street (AUD 109.65 million) and the ICB
Centre at 15 Butterfield Street, Herston
(AUD 67.5 million).
The investment case for Australia
was strong in 2009. Around 22.5%
of transactions recorded an offshore
purchaser (private and institutional).
The strong macroeconomic environment
and excellent market transparency
were highlighted by offshore investors
seeking to gain an exposure to the
Australian commercial property market.
The due diligence process increased as
offshore investors looked to reduce their
unsystematic risk, focusing on a number
of factors, including the employment base
and growth forecasts, income level and
growth and vacancy rates, as well as the
characteristics of the individual property.
Victoria (25.8%), the ACT (25.4%) and
New South Wales (25.3%) were the main
destinations for overseas investments
in 2009.
Deka Immobilien purchased two assets:
15 William Street, Melbourne (AUD
167 million), and the ATO building at 45
Francis Street, Northbridge, WA (AUD
95 million); while the Swiss-based AFIAA
purchased the Atrium at 60 Pyrmont
Street, Pyrmont, NSW (AUD 137 million).
Asian interest remained strong with
notable purchases including 20 Hunter
Street, Sydney (AUD 77 million) by CLSA.
In the second half of the year,
opportunistic offshore groups realised that
they had to realign their pricing as the
stock started to dry up and funds started
to recapitalise. This, coupled with the
increase in value of the Australian dollar
against major currencies, has affected
the ability of some groups to invest into
Australia, and subsequently, we saw the
departure of some opportunistic investors.
Sales campaigns
in late-2009 and
early-2010 showed
the first signs of the larger
A-REITs and Wholesale trusts
seeking to re-enter the investment
market. Many of these groups came to
the market with strong ‘buy’ mandates
from their investors with their major debt
issues behind them. A-REITs accounted
for 11.0% of the purchaser type by
value, but this figure was inflated by the
Commonwealth Property Office Fund
purchasing 145 Ann Street, Brisbane
(AUD 208.1 million) and a 50% stake of
54–58 Mounts Bay Road, Perth (AUD 95
million) in late 2009.
Prior to the current downturn, the last
major correction in property values
happened in the early 1990s. After that
downturn, syndicates became a preferred
vehicle with defined investment periods,
set distributions, struck interest rates
and, on occasion, established hedging
strategies. The market upswing between
2004 and 2007 led to an evolution in the
type of syndicated vehicle with a number
of open-ended syndicates comprising
of multiple properties diversified across
0% 10% 20% 30% 40% 50%
UnlistedProperty Trusts
Private Companiesand Investors
Offshore Investors
Developers /Property Companies
A-REITSSyndicatesInstitutions
Others
Buyer Vendor
Figure 5: Buyer and Seller Types in 2009
Source: Jones Lang LaSalle
sectors and financed through mortgage
backed securities and mezzanine debt
products. Syndicates accounted for 10.2%
of transactions in 2009, but there was
a return to the single building syndicate
of the early 1990s focused on yield and
potential for income growth (Figure 5).
ProductInvestors remained risk-conscious in 2009
and focused on income return, especially
as yield decompression continued through
the first half of the year. Investors do
not earn income on empty space and
transactional evidence suggests that
investors did not value vacant space when
purchasing assets in 2009. This sentiment
was also reflected in the lending practices
of major lenders. The ability to access
debt financing was difficult and assets
that had moderate to high levels of risk
were problematic to finance. Therefore,
investors typically avoided assets that had
a higher vacancy risk or short weighted
average lease expiry (WALE) and looked
for assets with a strong tenant mix and
income growth potential.
0
0.05
0.1
0.15
0.2
0.25
0.3
VIC QLD NSW ACT WA SA25,000,000
27,500,000
30,000,000
32,500,000
35,000,000
37,500,000
40,000,000
42,500,000
Total Share Average Transaction Size
Share of Transactions Average Value
Figure 6: Transactions by Market and Average Value
Source: Jones Lang LaSalle
Some of the characteristics of assets that
investors have typically been searching
for include:
Prime or good quality B grade assets;•
Strong covenant to blue chip tenant(s) •
or public sector occupiers;
Well structured , long weighted average •
lease expiry;
Attractive income growth potential •
through fixed rental increases;
Showed good value with the potential •
for medium-term yield compression; and
In some cases, repositioning potential.•
Breaking down the sales by market,
investment activity in Victoria and
Queensland was relatively firm, in part
reflecting the availability of assets as the
price point desired by private investors.
Furthermore, the vendor was typically
an unlisted property trust or A-REIT that
had an investment strategy to dispose of
assets in non-core locations.
Comparing the different states, Victoria
and Queensland accounted for 27.7%
and 21.3% of all transactions by value.
This was followed by New South Wales
(19.5%), ACT (12.9%), WA (10.3%) and
SA (8.3%) (Figure 6).
There was a reduction in the volume
of larger transactions in excess of AUD
100 million. Financial institutions were
unwilling to take on such large exposures,
and there was limited evidence of
syndicated lending. Furthermore, a higher
proportion of equity was required to fund
purchasers compared with the 2004–2007
period. As a result, there were only seven
transactions above AUD 100 million in
2009, compared with an average of 13
transactions between 2003 and 2007.
12 Jones Lang LaSalle | Office Investment Market Review
YieldsYield decompression that started in 2008
continued through the 1H09, before
slowing in the second half of the year.
It appears that the process of yield
adjustment has occurred for prime assets.
A cyclical reversal of rental growth, rising
vacancy and rising risk premium for
commercial property (and other asset
classes) were the main drivers pushing
yields higher in 2009. Through 2H09,
the clouds around each of these factors
started to lift. Rents stabilised in the
financial centres (Sydney and Melbourne),
while the rate of decline is slowing in the
resource-dominated markets (Brisbane
and Perth), vacancy pressures are starting
to moderate with the cyclical vacancy peak
being revised down, while risk aversion on
many indicators such as corporate bond
spreads, appear to be subsiding.
Since peaking in 4Q07, yields have
softened across all markets by between
175 and 200 basis points for prime assets.
The exception is Canberra where prime
yields have moved out by an average of
125 basis points. Investor risk aversion is
highlighted by the disproportionate interest
in the Canberra market from offshore
investors and domestic private investors
who have sought out counter cyclical
opportunities with strong covenants, long
lease terms and high NABERS energy
ratings. In this regard, there are few
commercial markets in the world with
characteristics similar to Canberra.
The current downturn highlighted the
‘mispricing’ of risk in the commercial
sector, cumulating in the spread between
prime and secondary assets compressing
to the tightest level on record in late-2007.
Greater yield decompression has been
recorded for secondary assets, and in
most markets, the re-establishment of the
historical prime/secondary yield spread
has occurred (Table 1).
13Jones Lang LaSalle | Office Investment Market Review
100
200
300
400
500
600
700
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Basis Points
SydneyMelbourneBrisbane PerthAdelaide Canberra
Figure 7: Equivalent Investment Yields and Real Bond Rate Spread
Source: Jones Lang LaSalle
Australian CBD office markets have
shown a strong positive relationship with
the inflation-adjusted bond rate. The
market downturn and rising investor risk
aversion resulted in prime equivalent
yield decompression and a rise in the
risk premium. The real bond rate has
stabilised slightly below 3.00%, resulting
in an implied risk premium above the
long-term average in all CBD office
markets (except Canberra) (Figure 7).
Based on this valuation benchmark, prime
assets are in fair value to cheap territory
and we expect the historical risk premium
to be re-established in 2010 and 2011 as
investor confidence increases.
Market BalanceThe national vacancy rate increased by
2.5 percentage points to 8.0% in 2009.
As the CBD office markets approach a
point of inflexion, the headline vacancy
rate remains within the 7% to 8% band
generally regarded as equilibrium for the
national markets. Completions across the
national office markets peaked in 2009
with approximately 659,200 sqm
of new and refurbished space entering
the market.
2009 was a year of two halves for the
Sydney CBD office market. Negative
net absorption was recorded in 1Q09
and 2Q09 as tenants contracted and
sub-lease availability continued to rise.
14 Jones Lang LaSalle | Office Investment Market Review
The market recorded four successive
quarters of negative net absorption (3Q08
to 2Q09) totalling 194,700 sqm, or 4.1% of
total stock. From a demand perspective,
conditions in the Sydney CBD were
weaker than the early 1990s. However,
the rise in vacancy was stemmed by a
reduction in total stock. Vacancy rose
from 7.5% in 2008 to 8.9% in 2Q09
before tightening to 8.2% by year-end as
the tentative recovery in tenant demand
resulted in positive net absorption (22,100
sqm) for 2H09.
From a demand perspective, Melbourne
was the stand out performer. Net
absorption totalled 64,000 sqm in 2009 led
by pre-commitments to new developments
and the continued net flow of tenants
from the fringe and suburban markets to
the CBD. Vacancy increased from 5.3%
in 2008 to 6.4% in 2009 as backfill space
became available from the completion of
153,200 sqm during the year.
After an extended period of below average
vacancy, completions totalled 222,200
sqm in the Brisbane CBD, equating to
12.3% of total stock. Approximately 80% of
the space was pre-committed or leased by
year-end and net absorption was 63,600
sqm. However, restrained tenant demand
for backfill space resulted in vacancy rising
by 6.4 percentage points through the year
to 10.2%.
Similar to Brisbane, completions in the
Perth CBD were strong (92,200 sqm),
pushing the headline vacancy rate out to
7.7%. Negative net absorption (–7,100
sqm) was recorded in 2009, although there
was a noticeable turnaround in sentiment
in the second half of the year with the
approval of the Gorgon Gas development
precipitating a strong recovery in leasing
enquiry.
With a moderate development pipeline
and soft tenant demand, vacancy in
the Adelaide CBD drifted out by 4.4
percentage points through 2009 to 8.2%.
Despite the rise in vacancy, the current
figure remains below the 10-year average
(8.8%).
Canberra recorded another year of strong
completions in 2009 (99,900 sqm). Tenant
demand was subdued in 1H09, but
recovered in the second half of the year as
the growth in the public sector translated
into positive net absorption. Vacancy
peaked at 9.4% in 2Q09, before tightening
to 8.5% by year end (Figure 8).
0% 2% 4% 6% 8% 10% 12%
Melbourne
Perth
Adelaide
Sydney
Canberra
Brisbane
National
Dec-07 Dec-09
Figure 8: CBD Office Markets, Vacancy Rates
Source: Jones Lang LaSalle
2010 will continue the strong ending to 2009, which marked the return of A-REITs and Superannuation funds to the investment market. This, combined with the continuation of offshore buyers looking to gain exposure to the Australian commercial market, will see the depth of demand for prime assets continue to increase. The recent campaign for RBS Tower @ Aurora Place provided an insight into the level of investor demand for a rarely traded premium asset.
The fundamentals of the Australian office markets remain positive and the prospect of yield tightening over the short to medium term as historical relativities are restored is expected to drive total returns above the long-term benchmark in Sydney and Melbourne.
John Talbot Head of Capital Markets – Australia
Market FundamentalsYields – The outlook for prime yields
has improved as rents approach the
trough in the current cycle. In previous
market recoveries, investment yields have
tightened on the expectation of rental
growth. Furthermore, yields over-correct
during market downturns. Valuation
benchmarks such as the spread between
the property yield and the real bond rate
indicate that prime assets in CBD office
markets are in cheap territory with the
risk premium between 40 (Adelaide)
and 110 (Melbourne) basis points above
the 10-year average. The exception is
Canberra where counter cyclical drivers
and a re-rating of the market have
ensured that investor activity remains
strong.
Base Office Demand – There has been
an improvement in the lead indicators
for office demand in late-2009. The NAB
monthly Business Survey (February 2010)
showed that confidence rebounded to an
eight-year high, while the employment
component of the survey continues to
improve and is now above long-term
averages. Furthermore, the ANZ Job
Advertisements Series (February 2010)
noted that job advertisements troughed
in July 2009 and were up 28% through
February. The improvement in these
surveys is reflected in Access Economics
outlook for employment growth in the
finance and insurance and property and
business services sectors at 3.2% and
4.1% in 2010.
The upturn in business confidence
precipitated a recovery in leasing enquiry
figures. All markets recorded increased
enquiry levels in the second half of
2009, and leasing activity is expected
to improve as tenants take advantage
of the softer rental market conditions
and the availability of prime contiguous
space to upgrade or consolidate their real
estate requirements. Consequently, net
absorption across the CBD office markets
is forecast at between 225,000 sqm and
275,000 sqm in 2010, above the 48,400
sqm recorded in 2009.
Supply – Total completions across CBD
office markets in 2010 are forecast to
be strong at 622,500 sqm, slightly down
from the levels recorded in 2009 (660,000
sqm). Almost 55% of the space under
construction is pre-leased. Completions
are forecast to be strong in Canberra
(160,100 sqm), Perth (136,500 sqm),
Sydney (126,500 sqm) and Melbourne
What does 2010 hold? (118,200 sqm). Completions will slow
from the record levels in Brisbane
(72,900 sqm), while there is minimal new
development in Adelaide (5,420 sqm).
Access to development finance remains
difficult while major occupiers have been
reluctant to pre-commit. Furthermore,
the rise in capitalisation rates has raised
the rent required for developer feasibility
models. Only seven new developments
in excess of 10,000 sqm commenced
in 2009 and given a lead time of 24–30
months for a major CBD development,
short to medium-term supply additions
are forecast to be relatively benign. At the
onset of the credit crunch in late-2007,
Jones Lang LaSalle Research forecast
supply additions of 1.48 million sqm
between 2011 and 2013, a figure which
has been revised down to 763,000 sqm in
our current forecasts.
Vacancy Rates – At 8.0%, the vacancy
rate remains within equilibrium for the
national office market. Over the next 12
months, vacancy is predicted to rise and
reach a cyclical peak between 9.0% and
9.5%. Tenants are starting to upgrade from
secondary to prime space and similar to
previous cycles, vacancy will be displaced
to poorer quality secondary-grade assets.
16 Jones Lang LaSalle | Office Investment Market Review
Vacancy Rate
0
10
20
30
40
50
60
0% 5% 10% 15% 20% 25%
Incentives (Months Rent Free on a 10-Year Lease)
2009
2012 F
Figure 9: Sydney CBD Vacancy Rate and Incentives
Source: Jones Lang LaSalle
Effective Rents – Prime gross effective
rents appear to have reached the trough
in the financial centres (Sydney and
Melbourne) while the rate of decline is
starting to slow in the resource-dominated
markets (Brisbane and Perth). There is
a strong positive correlation between
vacancy and incentives in Australian
office markets. The following chart shows
quarterly observations over the past 25
years. The current levels of incentives in
the Sydney CBD office market are outliers
on the time series. Essentially, landlords
offered a higher level of incentive in 2009
to maintain occupancy rates and cash flow
over what was expected to be a protracted
downturn. As the market stabilises,
leasing incentives will ease to a level more
attuned to market fundamentals in Sydney
(and Melbourne), resulting in positive
effective rental growth from late-2010
onwards. The correction in Brisbane
and Perth effective rents is expected to
continue for a further 12 months, before
stabilising in 2011(Figure 9).
Buyer ProfileThe relative strength of the Australian
economy has not gone unnoticed by
domestic and overseas property investors
and it is evident that distressed quality
prime assets will not appear on the
market. Furthermore, risk premiums
for prime assets are above historical
benchmarks and the prospect of rising
income in the medium term will attract a
greater depth to the buyer pool than the
last two years.
Sales campaigns in late-2009 showed
the first signs of the large A-REITs
and Wholesale trusts re-entering the
investment market to compete for rarely
traded prime assets. Most analysts
estimate that the A-REITs have raised
excess capital relative to optimal gearing
and acquisitions will be a key strategy for
larger A-REITs that are now focused on
growing portfolios to boost dividends to
shareholders. Nevertheless, the extent of
the debt refinancing task over the next few
years ensures that smaller A-REITs will
continue to be active vendors and look to
dispose of non-core assets.
17Jones Lang LaSalle | Office Investment Market Review
The Australian investment market
continues to appear attractive for a
number of global property investors, with
the combination of a highly developed
and transparent real estate market and
solid fundamentals in comparison with
a number of mature markets in North
America and Europe. There are, however,
hurdles to entry. On a trade weighted
basis, the AUD rose 25.8% between
2008 and November 2009, and by 32.4%
against the USD. The appreciation of the
AUD may represent a hurdle for overseas
investors looking to gain exposure to the
Australian real estate markets.
The prospect of strong capital value
over the medium term will see overseas
institutions with global mandates target
Australia, but as other mature market
approach a trough in the value cycle and
start to offer stronger upside potential,
Australia may see a reduction in the level
of counter cyclical overseas investors.
As a result of growing institutional and
overseas interest, the total and average
value of transactions is predicted to
increase over the next 12 months. We
expect to see more transactions in excess
of AUD 100 million relative to 2008 and
2009, although it is unlikely it will be to the
level recorded between 2003 and 2007.
Private investors will continue to seek
out counter cyclical opportunities. As
the demand outlook continues to firm
and most markets have a moderate
development pipeline, the growing
competition amongst private investors will
encourage them to consider assets that at
the time of purchase offer some risk such
as vacancy, competition and lease expiry.
Even with a higher risk, these assets offer
the opportunity for innovative strategies to
maximise both capital and income returns.
A compelling case for the refurbishment
of secondary assets is emerging. Benefits
include tenant retention, increased income
and lower vacancy. The market is more
discerning regarding covenant, lease
term and the physical attributes of an
asset and refurbishment can amortise
the yield spread and owners can achieve
a significant return on investment
through a minor or staged refurbishment.
Consequently, property companies
and private investors will start to target
asset with refurbishment potential as the
year progresses.
18 Jones Lang LaSalle | Office Investment Market Review
Major Transactions Throughout 2009
Location: Adelaide
Sale Date: April 2009
Sale Price: AUD 76 million
NLA: 25,244 sqm
Rate: AUD 3,011 per sqm
Initial Yield (passing income): 9.67%
Vendor: AMP Life Ltd
Purchaser: GDI Property Group
A landmark office tower, 25 Grenfell Street is a 23-storey building positioned at the centre of the Adelaide CBD. This makes the property easily accessible through all forms of public and private transport, and is highly visible from the flight path. The AUD 76-million building has a total NLA of 25,244 sqm and sale rate of AUD 3,011 per sqm. It comprises basement car parking, a plaza, modern foyer, retail accommodation on the ground level and quality office accommodation from the 1st to the 23rd levels.
25 Grenfell Street
Location: Brisbane
Sale Date: June 2009
Sale Price: AUD 109.65 million
NLA: 19,167 sqm
Rate: AUD 5,721 per sqm
Initial Yield (fully leased): 8.24%
Vendor: Colonial Office Fund
Purchaser: S.KW Pty Ltd
Commonly known as the HSBC Centre, 300 Queen Street is a 24-storey commercial office building that is prominently situated at the heart of the Brisbane CBD. The AUD 109.65-million building has a total NLA of 19,167 sqm and a price rate of AUD 5,721 per sqm. It comprises 18,213 sqm of Grade A office accommodation and 954 sqm of prime retail space adjacent to the Post Office Square.
300 Queen Street
Location: Newstead, Queensland
Sale Date: July 2009
Sale Price: AUD 173 million
NLA: 30,904 sqm
Rate: AUD 5,598 per sqm
Initial Yield (fully leased): 7.73%
Vendor: FKP Commercial Developments Pty Ltd
Purchaser: Cromwell River Park Trust
Energex @ Gasworks is a landmark commercial and retail building. This development is currently under construction within the AUD 1-billion master-planned Newstead Riverpark mixed-use development. Targeting a six-star Green Star rating, the development will comprise basement car parking on two levels, retail accommodation on the ground level and office space on the upper six levels. Upon completion, the building will provide 28,614 sqm of commercial accommodation and 2,290 sqm of retail space. The purpose-built complex will accommodate Energex, which has fully leased the commercial component of the building as well as 252 car bays for an initial term of 15 years.
33 Breakfast Crek Road
Location: Genge Street, Canberra
Sale Date: July 2009
Sale Price: AUD 205 million
NLA: 42,680 sqm
Rate: AUD 4,803 per sqm
Initial Yield (fully leased): 7.43%
Vendor: QIC
Purchaser: Real IS
Commonly known as the Australian Tax Office Headquarters, the ten-storey office building is situated along Genge Street in Canberra. The property, which was completed in 2008, is part of the AUD 500-million redevelopment of Section 84 by Queensland Investment Corporation (QIC). It has a total NLA of 42,680 sqm and a sale rate of AUD 4,803 per sqm. The building includes two storeys of basement car parking, which has about 400 parking bays. Achieving a 4.5 NABERS rating, the property comprises 1,584 sqm of retail space and 41,096 sqm of office accommodation
Australian Tax Office Headquarters
Location: Melbourne
Sale Date: June 2009
Sale Price: AUD 167 million
NLA: 40,844 sqm
Rate: AUD 4,089 per sqm
Initial Yield (passing income): 8.85%
Vendor: AMP Capital Investors
Purchaser: Deka Immobilien
Known as 15W, 15 William Street is a 20-storey office building that is located at the heart of Melbourne’s high-profile financial district. It enjoys extensive frontage to William and Flinders streets, and Flinders and Custom House Lanes. The building, which was constructed in 1967 and completely refurbished and upgraded in 2006, currently provides Grade A office accommodation and incorporates parts of the ground floor for retail use and parking space. It has a total NLA of 40,844 sqm and a sale rate of AUD 4,089 per sqm.
15 William Street
19Jones Lang LaSalle | Office Investment Market Review
Location: Docklands, Melbourne
Sale Date: April 2009
Sale Price: AUD 340.10 million
NLA: 8,019 sqm
Rate: AUD 4,116 per sqm
Initial Yield (passing income): 8.60%
Vendor: APN
Purchaser: Private Investor
A signature Grade A office building, 120 Harbour Esplanade is located within Melbourne Docklands – Australia’s premier commercial growth centre. The eight-storey property, which features a modern design and was completed in 2005, enjoys outstanding waterfront views and is securely leased to a high-profile blue chip tenant. The building, which has a total NLA of 8,019 sqm and a price rate of AUD 4,116 per sqm, provides 50 parking slots on the basement level.
120 Harbour Esplanade
Location: Northbridge, Perth
Sale Date: March 2009
Sale Price: AUD 95 million
NLA: 22,013 sqm
Rate: AUD 4,316 per sqm
Initial Yield (fully leased): 9.78%
Vendor: Macquarie
Purchaser: Deka Immobilien
Accredited with a five-star NABERS energy rating, 45 Francis Street provides one of the largest floor plates in Perth. Constructed in 1992, the property offers a high level of income security with a lease to the Australian Taxation Office expiring in 2017. The property, which has a total NLA of 22,013 sqm and a sale rate of AUD 4,316 per sqm, comprises five levels of Grade A office space, a basement car parking and eight retail tenancies on the ground floor.
45 Francis Street
Location: Perth
Sale Date: March 2009
Sale Price: AUD 38 million
NLA: 11,911 sqm
Rate: AUD 3,190 per sqm
Initial Yield (fully leased): 6.37%
Vendor: Macquarie
Purchaser: Private Investor
Enjoying high exposure to pedestrian traffic, 81 St Georges Terrace is located on the southern side of St Georges Terrace intersecting Howard Street. The property, which has a total NLA of 11,911 sqm and a sale rate of AUD 3,190 per sqm, comprises office space on the upper 11 levels, a retail space on the ground level and a basement parking on the lower ground level.
81 St Georges Terrace
Location: Sydney
Sale Date: July 2009
Sale Price: AUD 55 million
NLA: 10,328 sqm
Rate: AUD 5,325 per sqm
Initial Yield (fully leased): 8.59%
Vendor: Dexus Property Group
Purchaser: Abacus Property Group
Heritage-listed 343 George Street is a ten-storey commercial office building situated on the south-west portion of the CBD core precinct, which enjoys direct frontage to George and Barracks Streets. The 1,169 sqm site, which was completed in 1925 and refurbished in 2006, has a total NLA of 10,328 sqm and a sale rate of AUD 5,325 per sqm. It comprises 834 sqm of retail space on the ground level and 8,450 sqm of office space, with the remaining area comprising lower ground and basement accommodation.
343 George Street
Location: Pyrmont, Sydney
Sale Date: November 2009
Sale Price: AUD 137 million
NLA: 19,790 sqm
Rate: AUD 6,923 per sqm
Initial Yield (fully leased): 7.33%
Vendor: Charter Hall Group
Purchaser: AFIAA Foundation for International Real Estate
Completed in 2006, ‘Atrium’ or 60 Union Street is located in Pyrmont, Sydney. The property comprises an eight-storey commercial building, a four-storey terrace building and a retail space on the ground floor and lower ground floors. The eight-storey tower is allocated for office space, while the four-storey terrace building that fronts Union Street comprises retail space on the lower ground floor and office space on three floors. The building, which was accredited with a four-star NABERS rating, has a total NLA of 19,710 sqm and a sale rate of AUD 6,923 per sqm. It comprises two levels of basement parking with 182 parking slots.
60 Union Street
All Office Transactions – 2009
Property Name Address Suburb Month Sale Price Initial Yield NLA (sqm) Rate ($ per sqm) Vendor Purchaser
New South Wales
61-79 Quay Street Haymarket Feb $38,000,000 N/A Site N/A NGI Investments Metroland Australia Limited
379-381 George Street Sydney Feb $24,000,000 N/A Site N/A Derisi Pty Ltd Terra Australis Property Fund
1 Bligh Street Sydney Feb $210,000,000 N/A Site N/A Dexus Property Group Cbus Property
50 Margaret Street Sydney May $40,500,000 10.20% 8,722 $4,643 Challenger Hybrid Fund Phillip Wolanski
Kindersley House 33 Bligh Street Sydney Jul $75,000,000 N/A 18,241 $4,752 Investa Funds Management Ltd Energy Australia
343 George Street Sydney Jul $55,000,000 8.25% 9,932 $5,538 Dexus Property Group Abacus Property Group
Macquarie Place 45 Macquarie Street Parramatta Jul $15,000,000 N/A Site N/A Becton Property Group Crown International Holdings Group
54 Park Street Sydney Aug $50,000,000 10.00% 15,950 $3,135 PBL Property Pty Ltd AMP Capital Investors Limited
505-523 George Street Sydney Oct $85,000,000 9.52% 16,554 $5,135 Challenger Coombes Property Group
The Atrium 60 Union Street Pyrmont Nov $137,000,000 7.33% 16,800 $6,919 Charter Hall Core Plus Office Fund AFIAA Foundation for International Investments
AMP Building 20 Hunter Street Sydney Nov $77,000,000 7.90% 9,942 $7,745 Grosvenor Group CLSA
25 Smith Street Parramatta Nov $48,400,000 7.54% 11,058 $4,377 Grosvenor Group Private Investor
234 Sussex Street Sydney Nov $46,000,000 8.30% 10,020 $4,591 Stockland Property Group Clipper Property Group
93 George Street Parramatta Dec $18,500,000 10.48% 7,217 $2,896 Becton Office Property Fund No. 2 Quintessential Constructions
Victoria
457-471 Bourke Street Melbourne Jan $34,000,000 9.19% 15,132 $2,247 Macquarie Direct Property Fund Manhattan Investments
Chandler McLeod 473-481 Bourke Street Melbourne Feb $42,000,000 5.38% 9,290 $4,521 473 Bourke Street Pty Ltd Royal Automotive Club of Victoria
1 Spring Street* Melbourne Apr $65,200,000 7.73% 31,776 $4,115 Australian Prime Property Fund Henroth Group
IOOF Centre 303 Collins Street Melbourne Apr $56,000,000 10.17% 20, 591 $2,720 Macquarie Direct Property Fund Phileo Australia Limited
Victoria Point Docklands - Stage 1 120 Harbour Esplanade Melbourne May $33,010,000 8.60% 8,019 $4,116 APN Direct Property Fund Private Investor
15W 15 William Street Melbourne Jun $166,500,000 8.73% 40,400 $4,121 AMP Australian Core Property Portfolio Deka Immobilien Investment
Victoria Police 412 St Kilda Road Melbourne Jun $42,000,000 9.57% 16,285 $2,579 ING Office Fund Private Syndicate
369 Royal Parade Parkville Jun $19,930,000 11.80% 8,676 $2,297 Investa Property Group Riverlea
Aviva House 509-511 St Kilda Road Melbourne Jul $55,000,000 9.72% 19,687 $2,794 Dexus Wholesale Property Fund Calibre Capital
215 Spring Street 209-227 Spring Street Melbourne Aug $59,000,000 8.50% 15,500 $3,806 Colonial First State (Private Investor Fund 1) Knowles Group
Australian Tax Office 990 Whitehorse Road Box Hill Aug $43,800,000 11.47% 26,650 $2,121 ING Office Fund Glorious Sun
C100 100-106 Leicester Street Carlton Aug $29,800,000 N/A 7,000 $4,157 Blue Earth Developments Pty Ltd Melbourne University
456 Lonsdale Street Melbourne Aug $27,000,000 7.93% 8,226 $3,282 Maquarie Direct Property Fund Undisclosed
344-350 Collins Street Melbourne Sep $52,250,000 9.80% 17,800 $2,935 Orchard Commercial Office Fund Private Investor
Doncaster Corporate Park Stage 1 605 Doncaster Road Doncaster Sep $17,300,000 N/A N/A N/A Mirvac Real Estate Investment Trust Undisclosed
Customs House 414 La Trobe Street Melbourne Oct $49,500,000 9.36% 14,415 $3,434 New Star Asset Management Juilliard Group
883 Whitehorse Road Box Hill Oct $24,300,000 8.17% 7,237 $3,358 Blackrock Undisclosed
128 Exhibition Street Melbourne Oct $15,000,000 8.48% 4,778 $3,139 AMP Capital Investors Salvest Capital
606 St Kilda Road Melbourne Nov $23,750,000 10.01% 8,659 $2,731 Becton Office Property Fund Private Investor
446 Collins Street Melbourne Nov $18,300,000 7.80% 5,350 $3,421 Becton Investment Management H & TSC Pty. Ltd.
Owen Dixon Chambers West 525-539 Lonsdale Street Melbourne Dec $54,000,000 N/A 19,000 $2,842 Private Investors Barristers Chambers Limited
* 50% Stake
2009 Major Transactions (greater than AUD 15 million)
All Office Transactions – 2009
Property Name Address Suburb Month Sale Price Initial Yield NLA (sqm) Rate ($ per sqm) Vendor Purchaser
Queensland
321 Montague Road West End Feb $20,120,000 N/A N/A Site Energex Mirae Asset
ICB Central 15 Butterfield Street Herston Mar $67,500,000 7.70% 11,254 $5,998 Mirvac Domaine SEQ Growth Fund Bergh Pty Ltd
380 Queen Street Brisbane Apr $19,000,000 7.18% 4,359 $4,359 Aria Securities Pty Ltd Mineralogy Pty Ltd
159 Coronation Drive & 5 Cribb Street Milton May $21,060,000 8.78% 5,371 $3,921 Becton Diversified Direct Property Fund Private Investor
HSBC Building 300 Queen Street Brisbane Jun $109,650,000 8.14% 19,167 $5,721 Commonwealth Property Office Fund S.KW Pty Ltd
Energex Building 33 Breakfast Creek Road Newstead Jul $173,000,000 7.73% 30,904 $5,598 FKP Property Group Cromwell Riverpark Trust
157-163 Ann Street Brisbane Aug $21,500,000 9.84%* 6,679 $3,219 Macquarie Direct Property Fund City of Brisbane Investment Corporation
164 Grey Street South Brisbane Aug $15,000,000 9.17% 3,079 $4,872 Mirvac Funds Ltd Renweed
410-414 Queen Street Brisbane Sep $23,800,000 10.96% 5,878 $4,049 Trinity Enhanced Return Fund Undisclosed
National Bank Central 180 Queen Street Brisbane Sep $22,000,000 N/A 3,652 $6,024 Mirvac PFA Diversified Property Fund Private Investor
400 Queen Street Brisbane Oct $15,750,000 6.53% 3,989 $3,948 Trinity Enhanced Return Fund Private Investor
State Service House 96 Albert Street Brisbane Oct $15,250,000 5.22%* 3,341 $4,565 Devine Ltd Undisclosed
King George Central 145 Ann Street Brisbane Nov $208,100,000 8.00% 27,820 $7,534 Leighton Properties Pty Ltd Commonwealth Property Office Fund
Centenary Square 108 Wickham Street Fortitude Valley Nov $63,500,000 8.89% 11,885 $5,343 Fortius Fund Management Pty Ltd Primewest
Western Australia
St Georges Centre 81 St Georges Terrace Perth Mar $38,000,000 6.33% 11,910 $3,191 Macquarie Bank Nick Tana
ATO 45 Francis Street Northbridge Apr $95,000,000 9.80% 22,013 $4,316 Macquarie Bank Deka Immobilien Investment
Phillips House 53 Ord Street West Perth Jun $41,500,000 7.74% 6,864 $6,046 Commonwealth Property Office Fund Primewest Management
1100 Hay Street West Perth Jun $38,000,000 9.34% 7,244 $5,246 Macquarie Bank (Macquarie Office Trust) Private
State One House 172-176 St Georges Terrace Perth Jun $35,000,000 10.41% 6,265 $5,586 GE Real Estate Investments Undisclosed
Alluvion 54-58 Mounts Bay Road Perth Nov $95,000,000 7.59% 22,395 $8,484 Charter Hall Opportunity Fund (No. 4) Commonwealth Property Office Fund
South Australia
Australian Taxation Office 81-97 Waymouth Street Adelaide Jan $51,000,000 9.16% 17,878 $2,853 Trust Company of Australia Ltd KTS Properties Pty Ltd
Chesser House 91-97 Grenfell Street Adelaide Jan $34,500,000 8.90% 11,483 $3,004 Stocklands Chesser Properties Pty Ltd
Naylor House 191 Pulteney Street Adelaide Feb $49,000,000 9.22% 16,000 $3,062 Macquarie Office Trust Perpetual Trustee Co Ltd
Grenfell Centre 25 Grenfell Street Adelaide Apr $76,000,000 9.49% 25,244 $3,011 AMP Life Ltd GDI Property Group
115 Grenfell Street Adelaide Aug $41,000,000 9.90% 13,238 $2,949 Investa Diversified Office Fund Grenfell 115 Pty Ltd
80 King William Street 70-80 King William Street Adelaide Oct $21,750,000 9.69% 8,105 $2,684 Trinity Funds Management Limited Peter Tunno
Conservatory on Hindmarsh 131-139 Grenfell Street Adelaide Nov $16,400,000 8.1% 4,050 $4,049 Grenfell East Century Funds Management
* Equivalent Yield
All Office Transactions – 2009
Property Name Address Suburb Month Sale Price Initial Yield NLA (sqm) Rate ($ per sqm) Vendor Purchaser
ACT
38 Akuna Street City Jan $22,000,000 N/A 12,522 $1,757 MacarthurCook Office Property Trust Amalgamated Property Group
62 Northbourne Avenue City Feb $38,000,000 8.51% 10,218 $3,719 Investa Property Group Credit Suisse Real Estate Fund International
Industry House 10 Binara Street City May $123,000,000 7.73% 28,250 $4,918 AMP Capital Wholesale Office Fund Andrew Roberts
ATO Stage 2 Genge Street City Jul $205,000,000 7.10% 48,045 $4,163 QIC Real I.S.
64 Allara Street City Jul $18,500,000 8.00% 3,154 $5,866 Orchard Funds Management Australian Ethical Investment
Northbourne Avenue Offices 82 Northbourne Avenue Braddon Nov $44,000,000 6.95% 6,799 $6,472 Melvip Undisclosed (Private Investor, Australia)
Perpetual Trustee 10 Rudd Street City Nov $18,700,000 9.52% 4,739 $3,946 Mirvac Real Estate Investment Trust Strada Pty Ltd
* Equivalent Yield
Authors
John Talbot Head of Capital Markets, Australia
+61 2 9220 8486
John Talbot is the Australian Head of Capital Markets at Jones Lang LaSalle. John is a 25-year veteran of
the commercial property industry in Australia with a background in institutional valuations, consulting, agency
and in more recent years major investment sales.
As the leader of the his firm’s Capital Markets business, John has been involved in some of the largest
investment transactions in Australia over many years including Chifley Tower and Aurora Place in Sydney,
the Melbourne Central complex in Melbourne, Central Plaza in Brisbane and Central Park
in Perth.
Andrew Ballantyne Associate Director, Research
+61 3 9672 6554
Andrew joined Jones Lang LaSalle in July 2007 and is an Associate Director within the national research
division. He is responsible for managing the provision of strategic research services to all of Jones Lang
LaSalle’s Victorian business lines and for conducting primary research on the national office markets.
Andrew also undertakes consultancy assignments across the property sectors for overseas and domestic
clients and is a key resource for the Jones Lang LaSalle: Real Estate Intelligence Service.
Andrew is an experienced industry researcher with over nine years experience in the property and transport
and logistics industries. Andrew holds a Bachelors degree in Business Economics (with honours) and a
Master of Applied Research.
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www.joneslanglasalle.com.au
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Brisbane Level 33, Central Plaza One 345 Queen Street Brisbane QLD 4000 tel +61 7 3231 1311
Brookvale 1 Dale Street Brookvale NSW 2100 tel +61 2 9938 3122
Canberra Level 9, 15 London Circuit Canberra, ACT, 2601 tel +61 2 6274 9888
Glen Waverley Building 2 540 Springvale Road Glen Waverley VIC 3150 tel +61 3 9565 6666