Homepage
PR Newswire
11-12-2014, 11:09 PM
Bumper year ahead for Sydney CBD office conversion market
THE AUSTRALIAN DECEMBER 12, 2014 12:00AM
Kylar Loussikian
Journalist
Sydney
SYDNEY could be facing another bumper year of office to residential conversions, with more than 7 per cent of CBD office stock identified for redevelopment to apartments, according to a Macquarie Research analysis.
The research comes as a private Chinese group emerged as the buyer of a conversion possibility at 299 Elizabeth Street on the city’s eastern flank.
Conversion rate
The 12-storey building was sold by Burcher Property Group earlier this year, with Sydney-based Xinhua Zhong and Jingru Lin taking a half-stake each for a total price of $45 million.
The building, completed in 1989, has 385sq m of ground floor retail and 5943sq m of office space, with a top-floor penthouse.
At the time of the sale, co-selling agent John Bowie Wilson of Knight Frank, who handled the sale with CBRE, said the building sat in a part of the CBD where office buildings were being replaced by luxurious residential apartment complexes.
“There is much more residential development planned within 500 metres of 299 Elizabeth Street, and it is forecast that the ratio of office space to residential space will be very different within the next 10 years,” he said.
Nearby office towers slated for other uses include Cbus Property’s 130 Elizabeth Street that could have a 36-level apartment tower on Hyde Park.
Chinese group Shimao could also convert its recently acquired 175 Liverpool Street, and 233 Castlereagh Street, which China’s VIG has under option, is also slated for an apartment tower.
Close by, Coronation Property is planning for a 31-storey apartment and hotel tower in Commonwealth Street on the southern fringe of the Sydney CBD, with a design by architects FJMT.
About 365,000sq m of Sydney’s total CBD office stock has been purchased or identified as conversion opportunities with some impact on the office market, according to the Macquarie Research.
“While eventual conversion of this stock will depend on a number of factors including demand for apartments, DA approval and net absorption in the office market, such stock withdrawals will support a reduction in the office vacancy rate,” analysts Paul Checchin and Rob Freeman wrote.
But despite the level of stock withdrawal, “an elevated level of supply will sustain an above average level of vacancy in the Sydney CBD office market, making it difficult to see effective rental growth exceed expectations in the near term,” they wrote.
Despite significant new supply putting upward pressure on vacancy rates, Macquarie retained an outperform rating on GPT Group, Investa Office and Charter Hall Office, while it downgraded Dexus to neutral due to a strong share price performance in recent months, and maintained an underperform rating on Cromwell Property Group, given its low exposure to the Sydney CBD market.
THE AUSTRALIAN DECEMBER 12, 2014 12:00AM
Kylar Loussikian
Journalist
Sydney
SYDNEY could be facing another bumper year of office to residential conversions, with more than 7 per cent of CBD office stock identified for redevelopment to apartments, according to a Macquarie Research analysis.
The research comes as a private Chinese group emerged as the buyer of a conversion possibility at 299 Elizabeth Street on the city’s eastern flank.
Conversion rate
The 12-storey building was sold by Burcher Property Group earlier this year, with Sydney-based Xinhua Zhong and Jingru Lin taking a half-stake each for a total price of $45 million.
The building, completed in 1989, has 385sq m of ground floor retail and 5943sq m of office space, with a top-floor penthouse.
At the time of the sale, co-selling agent John Bowie Wilson of Knight Frank, who handled the sale with CBRE, said the building sat in a part of the CBD where office buildings were being replaced by luxurious residential apartment complexes.
“There is much more residential development planned within 500 metres of 299 Elizabeth Street, and it is forecast that the ratio of office space to residential space will be very different within the next 10 years,” he said.
Nearby office towers slated for other uses include Cbus Property’s 130 Elizabeth Street that could have a 36-level apartment tower on Hyde Park.
Chinese group Shimao could also convert its recently acquired 175 Liverpool Street, and 233 Castlereagh Street, which China’s VIG has under option, is also slated for an apartment tower.
Close by, Coronation Property is planning for a 31-storey apartment and hotel tower in Commonwealth Street on the southern fringe of the Sydney CBD, with a design by architects FJMT.
About 365,000sq m of Sydney’s total CBD office stock has been purchased or identified as conversion opportunities with some impact on the office market, according to the Macquarie Research.
“While eventual conversion of this stock will depend on a number of factors including demand for apartments, DA approval and net absorption in the office market, such stock withdrawals will support a reduction in the office vacancy rate,” analysts Paul Checchin and Rob Freeman wrote.
But despite the level of stock withdrawal, “an elevated level of supply will sustain an above average level of vacancy in the Sydney CBD office market, making it difficult to see effective rental growth exceed expectations in the near term,” they wrote.
Despite significant new supply putting upward pressure on vacancy rates, Macquarie retained an outperform rating on GPT Group, Investa Office and Charter Hall Office, while it downgraded Dexus to neutral due to a strong share price performance in recent months, and maintained an underperform rating on Cromwell Property Group, given its low exposure to the Sydney CBD market.