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$120m Premium Inner City Portfolio to hit the Sydney market

Property Markets / Transactions

Australia

May 29 2019

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Four premium, high profile assets all located within Sydney’s thriving downtown precinct – Chippendale, Darlinghurst and Ultimo are set to hit the market, offering diversified income with enormous upside in rental growth and development potential as strong demographics, conducive to greater growth in the inner city suburbs stand out to local and international developers and investors.

For sale through Tom Tuxworth, David Hickey, Jordan Lee and Nick Lower of Savills Australia, The Premium Inner City Portfolio has a potential fully leased income of circa $10 million and includes:

  • 55-59 Regent Street, Chippendale, a 4,100sqm Net Lettable Area (NLA) office on a 2.34 year Weighted Average Lease Expiry (WALE)
  • 8-14 Broadway, Chippendale, a 321sqm NLA retail space with 32 hotel rooms across four levels above at The Posh Hotel, with a WALE of 4.25 years
  • 114 Darlinghurst Road, Darlinghurst, which offers 191sqm NLA ground floor retail and 16 rooms above at the Sydney Boutique Hotel (total NLA 535sqm) and a WALE of 4.85 years
  • 137-145 Broadway, Ultimo, a 548 sqm NLA retail space on a 2.81 year WALE with 2 levels of accommodation above.

According to Tom Tuxworth, Savills Australia’s State Director - NSW, Metropolitan & Regional Sales, beyond each asset’s outstanding location, the properties offer a strong diversified income stream.

“The portfolio lends itself to the opportunity to add value through repositioning, redevelopment and/or re-leasing as expiries arise capitalising on leasing demand strong market conditions”. 

                                    

According to David Hickey, Savills Australia’s Senior Executive, Metropolitan & Regional Sales, the level of urbanisation and revitalisation these suburbs have experienced over the past five years has not been experienced by any other area nationally.

“Three out of the four assets are located on the door step of Fraser’s Central Park which has single handedly activated the surrounding retail precinct. The Central Park renewal development has created a gentrified population base who are attracted to the area due to the transport connectivity, amenity, prominent cultural attractions and notably the well-known and super prime restaurant and bar scene along Spice Alley Chippendale”  

Mr Hickey said a boom in infrastructure spending by the state government over the past few years has increased the connectivity of the area, not only to the Sydney CBD, but also to suburban Sydney, promoting the viability of the area to small business operators in attracting talent to work in their operations.

“These suburbs already benefitted from excellent public transport links and infrastructure, which have been further enhanced by current rail and road projects currently underway”. 

According to Jordan Lee, Savills Australia’s Joint State Head, Asia Markets, “Ultimo, Chippendale and Darlinghurst have long benefitted from a vibrant youth culture owing to the close proximity to some of the country’s finest tertiary educational institutions (Sydney University, University of Technology, University of New South Wales), as well as the well-known private secondary schools (Sydney Grammar, Cranebrook, Ascham, SCEGGS, Ascham) which help to drive foot traffic in the area, driving up retail trade, particularly food retailers, cafés and restaurants.

“Over the past year, we have seen a surge in the number of foreign student enrolments in Australian universities, private colleges, English language course and schools, with over 550,000 foreign students recorded to enrol over the past 12 months, an increase of 12 per cent over the previous year.

“A spike in the number of young, affluent professionals residing in these suburbs has further led to a retail renaissance, with the café culture gaining prominence to meet the demands of the local consumers” he continued.

According to Mr Tuxworth, the Sydney City Fringe is an extremely tightly held market, with only two commercial assets trading thus far in 2019 over $15m. The market is typified by rising rents with A grade office now achieving up to $850/sqm net, paired with historically low vacancy rates we have seen commercial net yields compress to sub 4% over the past 12 months.

“The significant investment into infrastructure with projects underway in Sydney's City Fringe such as; The Central station re-development, Sydney light rail & Sydney Metro will ensure better connectivity and amenity for tenants and occupiers, giving security of demand providing buyers with risk-averse investments.

Mr Tuxworth said investors and owner-occupiers are drawn to the convenient nature of these locations and the surrounding premium amenity that it provides, resulting in excellent hotel occupancy rates and record high office rental returns coupled with sub 3.00% vacancy (Dec-18). Recent projects, like Frasers Central Park has brought a new found retail activation and an abundance of amenity to the surrounding area.

“Despite some previous stigmas, the city fringe has established itself as one of Sydney’s fastest growing markets for high-rise developments and has seen extraordinary year on year rental and capital growth. For many years, the Sydney City Fringe has been a home for local investment groups, however, more recently has seen a strong following from buyers out of South East Asia and different parts of the Middle East and China.

“White collar employment growth, low vacancy rates, significant rental growth, and strong selling conditions over the past 18 months has contributed to the city fringe’s unprecedented pricing growth” he said.

Over the past five years, Ultimo, Chippendale and Darlinghurst have experienced population growth (15.6%, 35.9% and 12.5% respectively) above that of Greater Sydney (9.8%). 

A spur of infrastructure development over the past three years has further increased the attractiveness of the area to a host of small to mid-size developers looking to capitalise on positive forward looking demographic and economic drivers.

Mr Hickey said this is particularly true given lower median ages, comparatively higher incomes and greater proportions of full-time, tertiary qualified, white-collar workers.

“When was the last privately owned portfolio of this scale offered in the City Fringe? The pent up demand and lack of supply for quality freeholds in the Fringe market will no doubt see this portfolio be hotly contested from a wide range of buyers. Not to mention the flexibility and diversity of each offering will drive competition from multiple local and offshore buyers, particularly from Asia. 

“We are expecting each asset will appeal greatly to the value-add development fraternity, and the quality of the existing buildings and potential income streams and opportunity to capitalise on these improvements will be highly sought after” he continued.

The portfolio is offered for sale in one line, any combination or individually and is being marketed exclusively through Tom Tuxworth, David Hickey, Jordan Lee and Nick Lower of Savills Australia, via International Expressions of Interest closing at 2pm (AEST) Thursday, 11th July 2019.

For further information please contact:

 

Tom Tuxworth, State Director - NSW, Metropolitan & Regional Sales +61 (0) 410 988 960 ttuxworth@savills.com.au

SOURCE:

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