Chatswood tower fetches $438m in red hot Sydney office market

The Zenith Centre in Chatswood. Picture: Supplied

The heat in the office market has been put on display with a record purchase in Sydney’s suburbs by US heavyweight Starwood Capital and Sydney-based Arrow Capital Partners that have bought The Zenith Centre in Chatswood.

The building, sold by Centuria Capital and BlackRock for $438 million, is among a wave of towers in the suburbs to trade as the price of city buildings has soared.

Big-ticket deal-making on landmarks including Sydney’s MLC Centre and Melbourne’s 80 Collins Street have lifted values across the entire market and some suburbs are also benefiting from new train lines.

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The Zenith complex, which has twin towers, has been a big beneficiary of this trend as it last changed hands for $279m in 2016 and was leased up and repositioned by its vendors.

The sale shows the depth of demand is extremely strong, with 10 offers received, Centuria’s head of real estate and funds management, Jason Huljich, says.

He points to the pair’s strategy of enticing new tenants and getting rents from about $490 per sqm to recent deals being struck at $685 per sqm.

The sale was handled by real estate agencies Knight Frank and CBRE and more works could be in store as Starwood and Arrow look to capitalise on the office complex’s dominant position on north shore of Sydney.

The A-grade office complex has twin 21-level towers and basement parking and it has longer term potential for further redevelopment.

Starwood Capital has backed a nearby office project in St Leonards and also profitably traded out of a $600 million hotel and apartment scheme in Melbourne.

Starwood Capital vice president James Fogarty says the group has a targeted investment strategy in Australia, citing an economy that is underpinned by strong fundamentals, which will drive further momentum in the Sydney office market.

“We like the North Shore office market, and Chatswood in particular given the limited supply, robust demand and transformative infrastructure improvements that are underway,” he says.

Arrow Capital partner Kurt Wilkinson says The Zenith in Chatswood is the firm’s second Sydney acquisition with Starwood in the last year.

“The Zenith is the premier A-grade asset in Chatswood, is on a uniquely large landholding, and is underpinned by a high quality tenant base in a market with strong fundamentals,” he says, flagging plans to upgrade to keep Zenith at the top of its market.

This article originally appeared on www.theaustralian.com.au/property.