Abacus Property Group and Investec Australia Property Fund have acquired 324 Queen Street, Brisbane for $132 million, setting a more measured pace for the city's office market where vacancy levels have been rising.
The purchase of the 22-storey tower from Dexus Wholesale Office Fund and Brookfield Property Partners was struck on a rate of about $6700 per metre – about $3000 per square metre less than the price paid by the Singapore-listed ARA Asset Management for a nearby 25-level HSBC tower at 300 Queen Street earlier this year.
Abacus Property Group chief executive Dr Frank Wolf, who has long been an opportunistic buyer of assets, said he was very pleased to have acquired the property despite a challenging leasing market in the city.
"Where heavy lifting is required, the market discounts the value disproportionately," Mr Wolf said.
"It is a tough leasing market but if you create the product the tenant wants you get it leased."
The tower is 20 per cent unoccupied and the weighted average lease expiry is just 3.2 years.
The property sits in a premier position opposite Central Plaza at the junction of Queen and Creek Streets, in Brisbane's Golden Triangle.
The deal was negotiated by JLL's Seb Turnbull, Geoff McIntyre and Luke Billiau along with Knight Frank's Justin Bond and Ben McGrath.
Recent transactions in the Brisbane office market have now reached a scale and level of maturity that has captured the interest of big offshore investors.
On the radar
A recent report by Knight Frank notes that Brisbane's prime yields have continued to rise.
"It is not only Sydney and Melbourne that investors are now analysing," Knight Frank Queensland managing director Ben McGrath said.
"Brisbane is firmly on the radar of the huge amount of offshore capital seeking secure investment opportunities.
"The value proposition and higher returns that are achieved in Brisbane are escalating this appetite."
Mr Turnbull said the yield differential between Sydney and Brisbane was at a historic high at a time when the Brisbane vacancy rate was peaking.
"This gap, combined with the weight of capital in the market at present, is driving investors who can't get set in Sydney to now consider Brisbane."
Only one new office project is approved for the city between now and 2020 – Shayher Group's 300 George Street – which could lead to vacancies and incentives reducing after 2017.
The city is also benefiting from residential and tourism projects under development, such as Queens Wharf and Howard Smith Wharves, multiple new student accommodation buildings and 5-star hotel projects.
While Abacus and Investec's play may seem risky, other groups such as Melbourne-based fund manager Forza Capital have jumped into the market. Late last year, Forza bought an office building in Brisbane that was nearly 90 per cent empty for $20 million.
