Lendlease and Keppel REIT take $327m punt on North Sydney office growth
Global property giant Lendlease and Singapore-based Keppel REIT are taking a large bet on the growth of the North Sydney office market with the purchase of a $327.7 million tower development.
Located on the corner of Blue and William Streets, the 10-storey, 14,000 square metre property is under construction and was sold by Third.i Group. Known as Blue & William, the building was designed by global architects Woods Bagot with a focus on “wellness and tenant experience”.
Ms Shirley Ng, deputy chief executive of Keppel REIT, said the deal will boost her company’s assets under management to $S9 billion across 11 properties in Singapore, Australia and South Korea.
“The investment will also see Keppel REIT expand strategically into North Sydney, a major commercial district with positive leasing dynamics,” she said.
It will expand Lendlease’s exposure to the area through its construction of the NSW government’s Victoria Cross metro station project.
Tom Mackellar, managing director of Lendlease development, said the strategic acquisition supports the diversification of the group’s commercial product offering and “unlocks prime floor space for our customers in North Sydney”.
“The Blue and William development will cater for our customers looking for high-quality office design on a smaller scale,” he said.
The sale comes as the North Sydney’s office market is coming back to life with more than $3 billion of new office development and infrastructure projects over the next few years. It was hit hard through the past decades with vacancy rates heading towards 20 per cent.
Notwithstanding the pandemic, the area has recorded its third consecutive quarter of positive leasing demand in the third quarter of 2021, with new and refurbished buildings continuing to drive leasing activity.
In the Knight Frank Australia’s 2022 Outlook Report, chief economist Ben Burston said the pent-up demand for office space in 2022 would boost absorption rates and drive market recovery.
But he said the recovery will take place against a backdrop of an ongoing debate on workplace dynamics and uncertainty over businesses’ exact space requirements post-pandemic.
“These pressures will likely mean that absorption is unlikely to rebound quite as strongly as it has in previous global economic recoveries in the early 1990s and post-global financial crisis (GFC) period, but instead more closely resemble levels of demand similar to those experiences in 2015-2018.”
He added that new developments would be in demand as tenants would want offices designed to offer flexibility to attract staff away from home in the post-pandemic environment.
“Over the course of the pandemic, Australian employees have become accustomed to much more flexible working arrangements, and businesses will have to adjust not only their physical office spaces to suit these evolving demands, but also their policies along with it,” he said.
“Our research shows that many tenants will look to upgrade their office space in 2022, and as such, we expect premium and upper A grade space to be at the forefront of the resurgence in demand with more generic space less likely to be perceived as the compelling office of the future.”
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
Most Viewed in Business
Source: Thanks smh.com