Office landlords defy market conditions with new lease deals

AMP Capital kick started the new calendar year with top tier law firm Corrs Chambers Westgarth signing a lease for nearly 10,000 square metres over a 15-year term in Quay Quarter Tower.

Quay Quarter Tower, located at 50 Bridge Street, is part of the transformational Quay Quarter Sydney development and is owned by investors in the AMP Capital Diversified Property Fund (ADPF), AMP Capital Wholesale Office Fund (AWOF) and Rest, who will acquire a one-third interest in the tower upon completion.

Corrs will join previously announced tenant customers Deloitte and AMP, as well as EQT, a differentiated global investment organisation, who recently signed a lease for a part floor of prime high-rise office space in the Tower.

Together, this brings the total pre-commitment of Quay Quarter Tower to over 85 per cent, with the building due for completion in Q2 2022.

AMP Capital chief operating officer Real Estate and managing director, office & logistics Luke Briscoe, said for AMP Capital and Corrs to close out this deal in this current environment, “signifies the enduring importance of a workplace for businesses now and in the future”.

“Our team has worked closely with Corrs on understanding and adapting the Quay Quarter offer to suit their future workplace requirements. This includes a robust technology platform for high performance and a strong focus on wellbeing to support employee engagement,” Mr Briscoe said.

“In an environment where global economies are still in lockdown, we are seeing activity levels increasing in Australian cities.”

Dexus executive general manager, office, Kevin George

In the group’s interim result released during the week, the country’s biggest office landlord, Dexus executive general manager, office, Kevin George said the portfolio performed well in the six months with occupancy at 96 per cent, up from 95.4 per cent to he end of September 2020, following the completion of 151 deals representing 6.2 per cent of the portfolio by area.

“In an environment where global economies are still in lockdown, we are seeing activity levels increasing in Australian cities with people returning to CBDs and our buildings,” Mr George said.

“The commentary on working from home versus the office continues, but the impact on both near term and longer-term leasing demand is still not clear. Increased flexibility for employees was a pre-pandemic trend that has now accelerated. We’ve however had a busy six-month period of leasing and our experience across those deals completed shows the office footprint is substantially unchanged.”

He said face rents remain largely unchanged in the core CBD markets; however effective rents are under pressure as incentives continue to increase.

“Given the better than expected market occupancy levels and strength of key leading indicators, Dexus expects incentives to moderate in some markets over the next 12 months,” he said.

Some of the new Dexus leases included the NSW State government at 321 Kent Street, Sydney taking up 10,700 sq m; broking house Goldman Sachs at One Farrer Place, Sydney for 4,850 sq m and the
NSW Police at 2 Dawn Fraser Avenue, Olympic Park with 11,100 sq m.

For Investa’s group executive property Michael Cook’s team, the end of 2020 was busy with a number of important leasing transactions completed in its CBD buildings; Sixty Martin Place, co-owned with Gwynvill, and Deutsche Bank Place, 126 Phillip Street, Sydney.

Sixty Martin Place, the premium asset completed by the Investa-Gwynvill joint venture in September 2019, is almost fully occupied with tenants settling into their new work home over the last 12 months.

“Demonstrating that there are still leasing deals to be done in the current market, Investa’s leasing team in conjunction with Sarah Ballhausen of SB Property Consulting have finalised a number of recent deals at Sixty Martin Place and Deutsche Bank Place,” Mr Cook said.

“There is no question that business conditions are tough, however, there is still life in the market. Many businesses are adapting well to this unprecedented environment, some are bunkering down, while others are preparing for a new post-COVID world,” Mr Cook said.