CBD Office Buildings worth Billion Dollars have put in the Market

• Jun 7, 2024

Charter Hall and Dexus are selling CBD Office Buildings

Charter Hall and Dexus, public listed companies, have put gigantic CBD Office Buildings for sale over Sydney and Melbourne. These Australian property giants are undergoing recycle capital through their current real estate portfolios which worth billion dollars. The strategic Melbourne office buildings are putting to sale in Bourke Street and Queen Street, whereas the Sydney office buildings are ready to sell in Martin Place, Elizabeth Street and Pitt Street, Sydney. This CBD office portfolio over Sydney and Melbourne worth billion of dollars which is setting up one of the biggest valuation tests in the commercial market. The reason behind this is the soaring interest rate which lead to the low valuation in the market.

Charter Hall, Dexus and other anchor commercial landlords are moving forward to finance their expansion from real estate portfolios into developing blue-chips towers to attract high-quality corporate tenants. A large numbers of office assets are now being offered off-market when the owners gain confidence in this particular office sector. The interest rates of office sector had reset in the beginning of 2024 and a pool of office buyers have significantly increased compared to previous year.

High Interest Rates are Causing Building Values to Fall

Higher interest rates spiked up the risk premium required from commercial real estate market, which contribute to lucrative returns for the astute investors. As a mechanism, when rents are stabilized, the so-called lucrative returns or the relatively high yields followed interest rates and bond yields are higher, which causing building values to fall. As a result, there is a supply and demand gap between the buyers and sellers in every market cycle, and thus, the market is experiencing a high liquidity when the gap is narrower.

A-grade Office Assets are Putting Off-Market in Major Capital Cities of Australia

According to Financial Review, at least four premium, A-grade assets of Charter Hall are selling off-the-market across CBD of Sydney, Melbourne and Adelaide. The four A-grade assets including 231 Elizabeth Street and 333 George Street in Sydney, 200 Queen Street in Melbourne and 121 King William Street in Adelaide. These premium buildings are boast for their 5-star Naber rating with highest quality finishes which set apart from B-grade buildings. The A-grade commercial buildings are specifically built for the modern businesses or the ASX-listed corporate tenants. Listed property giants had found their prospective buyers who had shown interest in these premium assets despite the assets are not putting on-the-market.