NOT-for-profit RT Health Fund is looking to offload Surry Hills trophy asset Eveleigh House, which it has owned and part-occupied for more than 10 years, amid strong investor appetite for Sydney city fringe assets.
CBRE’s Gemma Isgro, Nicholas Heaton and Nick Wheatley are marketing 1-9 Buckingham St with leases in place to vendor as well as co-working space AEONA returning around $1.42 million per annum with fixed annual increases of 4%.
The four-storey building has a net lettable area of 1,696 sqm a weighted average lease expiry around 4.5 years.
Isgro said the buyer would not need to account for capital expenditure, vacancy, incentives or wait-out market rent reviews.
“This sale will be a true test to the strength of the investment market.”
Eveleigh House is positioned on Devonshire Street, which connects Sydney’s CBD to the Eastern Suburbs via the light rail, and is less than 100 metres from the $1 billion Central Station redevelopment.
Isgro said that the proximity to these significant infrastructure projects would ensure better connectivity and amenity for tenants while underpinning the property’s rental demand and capital value.
“The lack of commercial stock in Sydney’s CBD has seen an uptick in rental rates, leading to a positive ripple effect into the fringe markets.”
New data from Knight Frank shows surging rental growth in the city fringe had occurred alongside vacancy rates coming down to 2.8% by the end of the March quarter, compared to 4.1% in the CBD. Surry Hills vacancies are at 3.2%, while the suburb’s A-grade market yields are among tightest across the fringe, averaging between 4.25% and 5.50%.
Heaton said residential property values had outweighed commercial property values in Sydney’s city fringe in recent years, however, over the past 12 months there has been a shift from the highest and best use being residential to commercial.
He said A-grade commercial gross rents in Surry Hills are sitting above $1,000 per sqm, and with yields compressing at sub-5% commercial capital valued have moved in-line with, if not higher than, newly constructed residential property.
Expressions of interest close Wednesday, 31st July.
CBRE, in conjunction with JLL, recently sold 85-97 William Street in neighbouring Darlinghurst for more than $17 million. The 1,785 sqm triple-fronted retail and office building is tenanted by Deskspace, Budget and Australian Ugg Original, and is on a B4 Mixed Use zoned site of 539 sqm on the corner of Crown Street.
The City of Sydney has just sold the vacant 1911-built Stockton House at 73-75 William Street. The three-level building of 908 sqm traded for around $7 million and is also on a B4 Mixed Use zone property, of 242 sqm.
Late last year, the seven-storey building of 2,085 sqm at 111-117 Devonshire Street in Surry Hills sold for $21.2 million. A private local investor purchased the asset, which is leased to seven tenants and is on a 405 sqm site.