ASX-listed real estate fund manager Charter Hall has furthered its push into South Australia, snapping up two Adelaide office buildings for $51 million.
The group has purchased 60 Wakefield Street and 21 Divett Place, both currently leased to the state government and linked by a fourth-level footbridge, creating a significant 4,500sq m landholding in the core of the CBD.
The six-level 60 Wakefield Street building is set on a site area of 3,200sq m and includes a ground floor entrance, four upper levels of office space as well as a basement car park for 35 cars.
The 10-level 21 Divett Place building, located immediately northeast, spans 9,600sq m of commercial space across a site area of 1,300sq m and includes eight levels of office space, a basement, two plant room levels and eight open car parks.
The precinct is currently home to the South Australian Department of Education and Child Development, State Administration Centre, Santos, IAG, SA Police Headquarters and the Metropolitan Fire Service.
The sale process, negotiated by Savills Australia’s Rino Carpinelli on behalf of local investment firm 1835 Capital, was finalised in an off-market tender process reflecting a yield of 6.44 per cent.
“The buildings are located in the state’s premier business district, on one of Adelaide’s main east-west thoroughfares,” Carpinelli said.
“[The location] enjoys the highest concentration of office, retail, mixed business, cultural, public administration, hospitality, educational and tourist activities.
“In particular, the nearby Victoria Square is currently undergoing a significant upgrade by the Adelaide city council and is envisaged to become Adelaide’s premier meeting place.”
The Adelaide CBD, which gradually reopened in late-May following the end of national lockdown restrictions, has experienced minimal disruption as a result of Covid-19, with resilience across its office markets compared to the other states.
Over the third quarter of the year, the Adelaide CBD recorded -10,200sq m of net absorption while its headline vacancy rate increased by 0.6 percentage points to 15.4 per cent over the three months to September.
Confidence across South Australia’s commercial property sector has also continued to gain momentum, increasing for the second consecutive quarter, according to the latest Property Council survey.
Industry confidence in South Australia rose 12 points to 98 for the December quarter, where a score of 100 is considered neutral.
Transactions have remained somewhat subdued, with Knight Frank’s latest CBD office market report confirming sales activity in Adelaide has slowed significantly since March.
A total of $351 million worth of properties have been sold in the CBD so far this year, down 21 per cent on the same time last year.
Despite this, yields continued to compress, tightening to be around 5.5 per cent for prime CBD properties.
Last month, Charter Hall quietly picked up one of the city’s largest pre-commitments, with Services Australia, a federal agency that delivers Medicare, Centrelink and child support payments and services, for its 15-storey office tower at King William Street.
Upwards of 28,000sq m of the 40,000sq m development, on the site of the Southern Cross Arcade complex, will be taken by the government agency which will consolidate its five Adelaide sites into one space in 2023.