Adelaide’s falling office vacancy rates, strong return-to-work numbers and improving fundamentals have prompted Centennial to make its largest office acquisition to date.
The property investment manager and developer has paid $50.5 million for the prominent 11-level asset at 63 Pirie Street, the largest CBD deal in the SA capital this year.
The sale was on a yield of 8.6 per cent.
It acquired the tower from South Australia’s Raptis family through a sales campaign by CBRE and Colliers.
The tower, on the high-profile junction of Gawler Place that links the 63 Pirie Street to Rundle Mall, is in the Pirie Street precinct.
That precinct had undergone a renaissance of office upgrades and new developments, Centennial said, which had contributed to the area’s popularity as a preferred hub for commerce in Adelaide.
It said it would “support the precinct’s ongoing uplift through its own repositioning and upgrade strategy of 63 Pirie Street”.
Centennial head of portfolio management Nick Lidonnici said the acquisition was an opportunistic move—the transaction was a 16 per cent discount on a previously contracted sale price in 2022.
“Sustained high building costs across the country also factored into our decision to acquire the office tower given its replacement value would be more than double the $50.5-million price tag,” he said.
“The tower houses, and has attracted, high-quality tenants across a diverse spectrum of industries with staggered leasing profiles representing an average WALE of 3.7 years.”
Currently 87 per cent leased across 11,329sq m of net lettable area, blue-chip tenants include Macquarie Group, Bentleys, Cowell Clarke and global defence group Lockheed Martin.
The building has also recently secured Tank Stream Labs, which is currently completing an extensive fitout. Ground level tenants comprise retail, services and grab-and-go outlets, plus 34 carparks and end-of-trip facilities.
Centennial joint managing director Adrian Taylor said the group was entering Adelaide’s office sector at the right time.
“Market indicators including Adelaide’s positive net absorption, improving occupancy, rents and values point to the early upswing stage of the office cycle, and further supported by South Australia’s healthy economy which has maintained two decades of uninterrupted growth,” Taylor said.
Centennial joint managing director Paul Ford said the building would be placed into a closed-end fund, Centennial Pirie Street Trust, following a $31m capital raising launched last week to its network of high-net-worth clients and wholesale investors.
The sale of 63 Pirie Street was the largest Adelaide CBD office transaction for the year to date, Centennial said, as well as its largest office acquisition since the company was begun in 2011.
Centennial is active in the mid-space urban and infill industrial and logistics sector, holding investments valued at about $1.6 billion, including a 3ha industrial asset at Green Fields, 18km north of Adelaide’s CBD.
