Charter Hall makes capital play with $363m purchase in Canberra office market

Geoscience Australia is a Commonwealth agency that serves as the Australian Government’s technical adviser. Picture: Supplied

Property powerhouse Charter Hall has put its faith in the Canberra office market on display with the $363m purchase of the complex which houses Geosciences Australia.

The Canberra market has attracted renewed interest with the election of the Albanese government providing more certainty after a series of large leasing briefs have now found a home.

Canberra is considered attractive because of the long lease terms available and the certainty of government tenancies at a time in which some corporate uses are less committed to space.

The buy from German group Real I.S. takes the group’s deal-making in Canberra past $1bn and shows that big office players believe they can ride the bump of a slow return to offices by workers with the safety of long-term government leases.

“We are high conviction on the Canberra market, both on industrial life sciences and the office market – Canberra has got the lowest vacancy factor for prime offices of any market in the country,” Charter Hall chief executive David Harrison said.

He added that the property was attractive buying as it had a ten year lease to the federal government at a 4.7 per cent yield, while being in a hot sector.

“Geosciences is right up the pathway for our broader life science strategy and we think that‘s going to continue as a thematic in capital markets,” he said.

Charter Hall has been among the biggest buyers in the capital.

The Australian reported last month that it is also targeting the purchase of the Australian Taxation Office headquarters complex in Civic for about $290m, also from Real I.S.The property funds group is already deeply invested in the Canberra market and is separately supporting the development of a new building which the ATO will shift to in 2025.

In that play Charter Hall’s Prime Office Fund acquired the premium office site at 15 Sydney Ave, Barton, where the ATO is moving. It bought that from a development partnership comprising DOMA and Kenyon Investments.

The Geosciences Australia purchase is split between the listed Charter Hall Social Infrastructure REIT and the Charter Hall Long WALE REIT, which will each take a 25 per cent stake, and an unlisted Charter Hall fund.

The deal was brokered by Colliers and JLL.

The listed group said its stake in the property had been purchased for $90.9m and showed a 7.4 per cent initial yield and a 9.6-year weighted lease expiry.

The property comes with 3 per cent fixed annual rent increases and a net lease structure where the tenant is responsible for all property outgoings.

Sitting on a large 160,378sqm site, the property is located at 101 Jerrabomberra Avenue, Symonston, ACT, about 7kms from the Canberra CBD.

It comprises a specialised life sciences complex of 32,659sqm of lettable area across three separate buildings including offices, specialised labs and storage, warehousing, childcare facilities and parking for 652 vehicles.

Geoscience Australia is a Commonwealth agency that serves as the Australian Government’s technical adviser on all aspects of geoscience and custodian of the geographic and geological data of Australia.

The specialised labs include a geochemistry laboratory, geochronology laboratory, mineral separation laboratory, mass spectrometer facilities and the National Earthquake Alerts Seismic Centre.

In addition, the building incorporates leading ESG principles featuring a geothermal heat pump system and has achieved a Climate Active Carbon Neutral certification.

Since construction, significant capital has been invested in ongoing tenancy upgrades, as well as installing critical infrastructure and an on-site childcare centre.

Canberra offices have run hot since last year.

The biggest completed deal was Charter Hall and Singaporean sovereign fund GIC last December teaming to acquire a Canberra block for $335m from Korean firm Mirae. GIC took a 95 per cent interest in the property, while Charter Hall has 5 per cent.