Commerz Real is selling 110 Goulburn Street in Sydney.
Sydney’s office tower sell-off is gathering pace, with major assets flooding the market as hopes of a major upswing fade.
Large campaigns getting underway include German group Commerz Real selling the Australian Federal Police headquarters, and Merchant House, also in the Sydney CBD, being offered by a consortium including Phoenix Property Investors.
Phoenix Property Investors and its partners are selling Merchant House in Sydney.
The moves will test the demand for Sydney CBD stock at a time when the initial focus has been on Sydney suburban assets selling, often at levels showing a blow out in capitalisation rates.
However, there is also buying in the CBD at strong rates, with fund manager April Gate Capital seeking to raise $110m in equity to back its planned $182m purchase of 50 Pitt Street from AEW Capital Management. AEW bought the block for about $165m out of the TrustCapital Advisors portfolio in 2017 and then put $27m into a refurbishment.
That in-train deal is being handled by CBRE’s James Parry, Mitch Noonan and Flint Davidson and JLL’s Luke Billiau, James Barber and Andrew Rojek. They declined to comment.
Vendors are moving partly to capitalise on improving fundamentals in the central business district, including improving leasing markets and demand from offshore institutions and local funds.
The NSW headquarters of the AFP is expected to appeal to investors chasing a fully-leased Sydney CBD asset underpinned by a government covenant.
Commerz Real bought the building at 110 Goulburn Street for about $150m in 2015 and Colliers is now handling the sale. It could trade for a price of around $270m, according to industry players. The 13,600sq m complex is on a substantial 2,170sq m landholding. It has office space and critical infrastructure to back AFP operations.
The Goulburn St building has housed the agency for more than 28 years and a new ten year lease was struck in April that includes two further three-year options and fixed annual rental increases of 3.75 per cent.
“The AFP’s decision to recommit to the property for a further decade highlights the building’s critical role as the agency’s NSW headquarters and provides investors with exceptional income security,” Colliers sales agent Gillian Kaplan said.
As part of the lease renewal, about $31m has been committed to upgrade works, reflecting the AFP’s long-term commitment. “In a market increasingly focused on income durability, assets backed by long-term Commonwealth government tenants continue to command strong investor interest,” Colliers agent James Mitchell said.
In a separate move, Merchant House at 333 Kent Street is expected to draw investors as JLL kicks off a campaign. The redeveloped A-Grade office tower could bring bids for more than $300m. The private consortium that is selling revamped the building via an adaptive reuse project and then leased it up.
The 15-storey tower comprises 14,000sq m and it underwent a full redevelopment by builder FDC, which was finished in 2024. Six new levels of office space was added atop the now repositioned existing offices.
The property is currently 90 per cent occupied and tenants include LVMH, Ralph Lauren and Tank Stream, as well as a wellness retreat known as “The Sanctuary”. A new restaurant to be operated by hospitality group, Porteño, is to open later this year.
JLL’s Mr Billiau said there was a “clear division” in Sydney’s office market, where tenant demand and rental growth are concentrated in prime grade, well-located assets.
JLL’s Paul Noonan added that Merchant House combined the characteristics investors are increasingly seeking in the Sydney CBD being high-quality contemporary office accommodation, strong amenity, established income, and limited near-term capital expenditure.