The flight to value for money office accommodation continues in the southern precinct of the Sydney CBD office market, with Investa Property Group (“Investa”) recently finalising leases on more than 7,100 sqm of space at 260 and 280 Elizabeth Street, Sydney.
The leases will result in occupancy across both buildings increasing to 98% with the value of the leases providing $3.7 million in total annual rental income, and a weighted average lease term of five years for 280 Elizabeth Street and seven years for 260 Elizabeth Street.
Asset Manager Pele Alt believes the result provides further proof of the continuing strong performance of quality stock in the southern Sydney CBD office market.
“Recent leasing deals at 260 and 280 Elizabeth Street and in the local area have shown solid rental growth as a result of increased demand, with incentives trending down as supply is absorbed. 260 and 280 Elizabeth Street appeals to those tenants seeking good quality, institutional-grade accommodation at a reasonable price, that is close to the centre of the Sydney CBD.”
Ms Alt said Investa has been able to attract tenants from areas such as Sydney Olympic Park, Parramatta and North Sydney looking for more centrally located Sydney CBD office space, as well as those already in the immediately surrounding area seeking to upgrade their accommodation and expand their operations.
Some of the major leasing transactions recently finalised include:
- Teacher’s Health Fund for 2,691.2 sqm;
- Amadeus for 827 sqm. Amadeus are an existing tenant in adjacent 300 Elizabeth Street, who will now occupy 4,728 sqm in the complex; and
- Brown Forman for 1,305 sqm.
Directly adjacent to Central railway station, bus and light rail terminal, the buildings provide direct access to main arterial roads in and out of the city, and are walking distance to extensive dining and entertainment amenity in nearby Surry Hills.
Both buildings are part of the Centennial Plaza mixed use complex and incorporate 13,953 sqm and 17,992 sqm of total net lettable area respectively. Floor plates average 1,303 sqm to 1,345 sqm in size and are designed around a central core, providing good natural light and open outlooks from all floors. The concourse area around the buildings provides tenants with recreational, open space areas and on-site retail.
260 Elizabeth Street is designed to achieve a 4.5 star NABERS Energy rating, while 280 Elizabeth Street currently has a 4.5 Star NABERS Energy rating.
According to Pete Carstairs, Head of Research at Investa, tenant’s preference for better quality office space, which was clearly evident during 2011, is continuing in 2012.
“Prime vacancy in the Sydney metropolitan area is getting tight, and is now below 7% in most markets. Areas of the Sydney CBD, such as the southern precinct, are benefiting from tenants relocating from the suburbs seeking improved amenity.As no major projects will be completed in 2012, and less than 80,000 m2 of new stock under construction will be delivered before the end of 2014, we anticipate this supply constrained environment for prime office space in the CBD will result in effective rental growth in the near term,” said Mr Carstairs.
Frank Sassine of Colliers International and Rob Dickins of Savills are co-ordinating the leasing campaign.
Commenting on the recent activity Rob Dickins said: "Whilst the level of commitments in the broader market has been somewhat subdued, the success at 260 and 280 Elizabeth Street demonstrates that high quality, A Grade refurbished buildings with good amenity and convenient access to the Sydney CBD’s major rail and bus terminal are still keenly sought."
Frank Sassine of Colliers added: “Declining vacancy in non-Sydney CBD markets such as Parramatta at 1.9%, and North Sydney at 2.1%, has seen new tenants start to enter the CBD market looking for a cost effective solution, which these buildings provide."
Investa currently owns and/or manages 18 buildings in the Sydney CBD totalling more than 563,614 sqm of net lettable area.