Cities run hot as office buyers come back

The moves mark the start a new phase for cities as landlord and funds managers vie for new towers in Sydney.

Property major Lendlease is putting its stamp on the North Sydney office market with the acquisition of a boutique office development in Blue St and Abacus is making play in the heart of Sydney in separate deals worth close to $600m in total.

Lendlease’s funds unit is buying the development from the private Third.i Group, which assembled the site and kicked off works with ambitions to finish the complex by mid 2023.

Lendlease has drafted in a capital partner, Singapore’s Keppel REIT, which has agreed to buy the A-grade tower for $327.7m on an initial yield of 4.5 per cent.

Lendlease is optimistic they will garner tenants for the Blue & William project as office workers flock to the area as an alternative to the CBD as the new metro opens.

The purchase is in keeping with Lendlease’s revamped funds model, where it has pledged to dramatically expand its operations. It will take on more capital partners and activate more projects to hit an $8bn per annum target by 2024.

Securing the 14,000sq m Blue St project will also help Lendlease, which is developing the landmark Victoria Cross project by lifting its share of the new office space. It would control the early supply as North Sydney readies for a wave of office projects.

Locking in Lendlease also bolsters Third.i which was first to market against fierce competition in North Sydney and shows its capacity to work up top quality projects ahead of larger players.

The proceeds are likely to be ploughed into new commercial and residential opportunities in Australia and offshore, with Third.i winning support for its projects from deep pocketed Asian investors.

There has been a surge of interest in the area on the back of the new metro station and workers are expected back even before they return to the city.

JLL’s Paul Noonan and Luke Billiau and CBRE’s Scott Gray-Spencer handled the sale of the 2,309sq m site.

The property was formed out of an amalgamation across five buildings at 2-4 Blue St and 1-5 William St, just a few hundred metres from North Sydney’s rail interchange.

It will sport views of Sydney Harbour, the CBD and Barangaroo as drawcards, and Third.i worked with architects Woods Bagot on the ten-storey building, which kicked off construction last year.

Meanwhile, Abacus Property Group is putting its faith in CBDs returning, with the listed fund buying a building being sold by private equity group Blackstone in the heart of Sydney.

Abacus is targeting 77 Castlereagh Street, which was put on the block by Blackstone for about $250m in October, and a purchase could the bolster its CBD holdings.

It is a believer in cities and in July joined with Charter Hall’s listed long lease property trust to buy a two-thirds stake in the landmark Myer Melbourne building for $270m.

The Steven Sewell-led Abacus has been an active buyer, and in the last quarter poured $370m into buying up self-storage assets, which it said were performing well in the face of lockdowns.

JLL’s Mr Billiau, Simon Storry and Mr Noonan and McVay Real Estate’s Rob Sewell and Sam McVay are handling the sale of that 19-level B-grade building.

Blackstone had been looking to capitalise on renewed interest in CBD office assets, which prompted it to put the office building which is part of the Westfield Sydney precinct on the block.