Sydney suburban splurge as $180m of office deals struck

A series of mid-size office blocks in Sydney are close to selling, with deals worth a total of about $180m in train. Picture: Supplied

A series of mid-size office blocks in Sydney are close to selling, with deals worth a total of about $180m in train as private investors and owner-occupiers swoop while institutions pull back from the market.

The deal-making will provide an indicator of the shift in the value of commercial buildings, as few have traded this year following interest rate hikes and concerns about higher vacancy levels.

Some assets have also been hit by the “flight to quality” as tenants leave lower-grade buildings, drawn by high incentives on offer in central business districts. But the sales show that private players are moving in at the low point of the cycle.

In North Sydney, AEW Capital has struck a deal to sell the 14-storey office block at 54 Miller St for more than $70m. An Asian buyer is believed to have snared the asset, which AEW picked up for $59.4m in 2018 and has since repositioned.

CBRE’s James Parry and Kenny Duncanson and Knight Frank’s Dominic Ong are handling the latest sale, but declined to comment.

AEW acquired the property for the third in its series of value-added funds focused on property investments in Asian gateway cities. The revamped complex has views across Sydney Harbour and the Victoria Cross Metro activation area.

AEW undertook capital works worth close to $20m on building services, facades and almost all internal aspects of the 6964sq m building. The block is about 80 per cent occupied.

In the western hub of Penrith, the listed Cromwell Property has quietly agreed on the sale of 2-6 Station St for about $48m to private company Sandran Property, which owns neighbouring properties.

Sandran’s assets in the Penrith CBD include a 15,500sq m office building on Henry St, which was refurbished for the Australian Taxation Office, and an approved 11,500sq m office project on Belmore St.

The 8437sq m complex was purpose-built for the NSW government, and is fully leased until 2028 to NSW government agencies which provide essential services to the Penrith ­community.

The block sits directly opposite Penrith station and Westfield, with the area expected to be transformed by the opening of the $11bn Western Sydney Airport in 2026.

The block was marketed by CBRE’s Mr Duncanson, Michael Andrews, Alex Mirzaian and Rachel Easy and JLL’s James Aroney, Mitch Noonan and Sophie Tieman.

They did not comment on the deal, which is likely to show a yield of about 7 per cent.

On the owner-occupier front, US cybersecurity company Fortinet has snapped up 162 Blues Point Rd in McMahons Point on the city’s north shore from private property company Kingsmede for about $60m.

The property is best known as the Amari office suites redevelopment. Earlier this year, the whole three-storey warehouse and office building was being extensively refurbished as office suites.

The vacant building was redeveloped in mid-1999 as offices, and it was last traded to private companies BL Point and Kingsmede BPR for $20m in 2012.

Fortinet is expected to defy the trend of tenants moving out of the city and will take up space in the A-grade building, which has a net lettable area of 4056sq m.

Colliers’ Alex McColl, James Mitchell and Gillian Kaplan as well as Knight Frank’s Graeme Russell ­handled the deal, but declined to comment.