Regional offices in vogue as buyers baulk at city yields

This office building in Grafton sold for $7.5 million

As returns from offices in capital cities remain under pressure, buyers are eyeing off regional centres as they seek to secure strong income streams from government and national tenants.

Groups seeking strong regional assets include Gold Coast based investment group DJ Property Ltd’s, which purchased a fully tenanted office building in Grafton for $7.5 million for a return of more than 11%.

The recently refurbished Grafton Complex comprises three buildings ranging in height from two to four levels, making the integrated properties the largest office building in the Clarence Valley.

The properties are leased to the New South Wales Government’s Roads and Maritime Services department and Laing O’Rourke at about $900,000 per annum.

They are chasing strong returns that are not available in capital cities

Colliers International director of investment sales, James Crawford says: “The property was sold on a yield in excess of 11%, which reflects that buyers such as syndicators are now looking further afield to regional centres to secure strong income streams from government and national tenants.”

“They are chasing strong returns that are not available in capital cities.”

CBRE’s newly released Brisbane Market Update shows that while a gradual improvement has been forecast for Brisbane’s commercial property sector, yields in the capital cities are still under pressure.

CBRE director of capital markets Flint Davidson cites the recent sale of Waterfront Place, in the Brisbane CBD, which transacted at a yield of 6.75%, as opposed to the 5.25% to 5.5% yield that could be expected on a comparable asset in Sydney.

One of the properties at 17-19 Prince St, Grafton, has a net settable area of

One of the properties at 17-19 Prince St, Grafton, has a net lettable area of 368sqm

The Grafton Complex is located at the junction of Prince and Victoria streets, in the heart of the Grafton’s central business district, and features a 5.5-star NABERS rating.

The three adjoining commercial structures are centred around a pedestrian courtyard fronting Victoria St.

Of the three properties, 17-19 Prince St has a net lettable area of 368sqm, 21 Prince St has a NLA of 979sqm, while the third property at 76 Victoria St is the largest at of 2552sqm.

DJ Property Ltd purchased the property on an unconditional cash basis from the vendor, NSW Government utilities company Essential Energy.

The complex was recently refurbished and features new air conditioning systems, new lighting, lifts and has a highly exposed large frontage with excellent street presence on a corner location.

The Grafton Complex was marketed in an expressions of interest campaign by Crawford and Henry Burke of Colliers International and Matt Dougherty of LJ Hooker Grafton.