Milligan Group chases breakthrough office deal in Sydney

The sale comes at a time when demand is building for office assets that will benefit from better leasing conditions.

Sydney offices are coming back in favour, with more sales tipped this year.

Privately-owned Milligan Group is selling its recently overhauled York Street building with expectations it will win bids around the $190m mark, industry players say.

While the focus has been on the group’s plans for a skyscraper on the corner of Sydney’s Pitt and Hunter streets, with Cbus Property emerging as a potential white knight for the group and financier Merricks Capital, the smaller asset is now in play.

The building at 32 York Street is being sold after hitting completion and nearing full occupancy, with the sale tipped to break the logjam of mid-range tower sales in Sydney’s CBD.

It was previously offered but buyer appetite is now picking up for well-positioned assets.

Originally built in 1886, the 12-level building known as York & Co is in the city’s luxury retail and dining precinct. It has been redeveloped into boutique A-grade offices.

The property has 11 office levels spanning 8202sq m, with a weighted average lease expiry of 6.5 years.

Major tenants include co-working space provider The Commons, student accommodation company Iglu, software analyst Vigilant Labs and design management consultancy Bendelta.

Knight Frank agents Tim Holtsbaum and Jonathan Vaughan and Josh Watts of Karbon Commercial are handling the sale.

Mr Holtsbaum said the York Street building would attract significant buyer demand, as a wide range of groups was looking for opportunities, particularly in Sydney.

“Positive momentum has returned to the Sydney CBD office market, particularly within the financial core,” he said.

Deals have mainly been at the larger end in the city.

Local funds house Investa and international giant BGO are closing in on the purchase of a 75 per cent stake in Grosvenor Place and a slice of Salesforce Tower traded.

“With stock levels tightening and investor confidence improving, there is growing appetite for well-located, income-producing assets, particularly those with limited capital expenditure requirements to preserve cash distributions,” Mr Vaughan said.

The York Street block is one of only four buildings under 10,000sq m to be developed in the Sydney CBD in the past decade, and one of only three north of Market Street with A-grade specifications.

Mr Watts said 32 York Street’s strong leasing since its completion late last year was testament to its quality and position within the market.

“It offers a unique and efficient design, mixing historic charm with modern amenities in the heart of the Sydney CBD,” he said.

“Given the current leasing status of 32 York Street, we’ve seen a clear uplift in buyer engagement for the asset as it provides a core investment proposition with a stabilised income profile and minimal leasing risk.”