Defence readies for major office moves in three cities
The Defence Department has flagged a major shake-up of its property holdings that could see it shift to new digs in Sydney, Melbourne and Canberra, in one of the department’s biggest ever real estate moves.
The government issued fresh space requirements just before the federal election was called but they will reverberate through office markets in the three capitals over the next term of government.
The size of the space demands could spark the development of major towers that need precommitments to get under way or prompt upgrades by landlords who want to keep Defence in their towers.
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In Canberra, the department is seeking A-grade office space of 30,000sqm to 65,000sqm and will look at offices in Reid, Barton, Parkes, Kingston, Campbell, Russell, Brindabella Business Park, Majura Park and Fairbairn. It wants access by late 2021, ahead of its existing lease expiring in 2022.
Defence could seek out either one or two new buildings and developers will be drawn to the prospect of it leasing buildings for up to 15 years. But the owners of its Campbell Park offices are likely to seek to keep it.
In 2017, property group Cromwell acquired an effective 49% interest in the ageing purpose-built complex for just $15.2 million. It has the option to acquire a direct 49% interest, as well an option over the remainder.
Cromwell has said it will work with the owner, Hong Kong-based Pacific Alliance Group, to negotiate a new lease that would see a major redevelopment of the existing site, which would substantially lift its value.
PAG bought the Campbell Park Offices for $100.4 million in mid-2013, picking up the 41,671sqm building from GE Real Estate as part of a nine-property portfolio.
In Melbourne, the department is seeking 16,000sq m to 20,000sqm of office space either in the CBD or its immediate surrounds, and is looking for a late 2020 entry.
German closed-end fund group Real I.S. bought its existing home at 661 Bourke Street in 2011. The nine-storey building in Melbourne’s CBD known as Defence Plaza, was picked up from the Brookfield Prime Property Fund.
The 19,000sqm tower was being refurbished at the time as part of the $100 million sale deal and could be in line for another upgrade.
In Sydney, Defence is seeking 15,000sq m to 20,000sqm of office space in either the Sydney CBD or split between the city and Parramatta. Its 2020 access dates may suit some developments in Parramatta that are already under way. Defence Plaza Sydney at 270 Pitt Street is owned by the ISPT Core Fund, which may seek to upgrade the facility in order to keep the department.
This article originally appeared on www.theaustralian.com.au/property.