Toowong office earns $25.15m from first-time commercial property investor

The office (marked) is five kilometres south west of Brisbane.

An offshore investor with a residential property portfolio – including in Australia at the Gold Coast – has made his first commercial acquisition, spending $25.15 million on an office with development upside in Brisbane’s Toowong.

Eighty eight Jephson Street was offloaded by State Development Corporation and White Partners, the advisory firm of the White family, Ray White founders, after a $600,000 refurbishment.

The five-level complex had already been modernised when the partnership paid Stockland $40m for it and neighbouring sites – all up a 1.3 hectare amalgamation – early last year.

The office contains 6441 sqm of lettable area and 136 car parks.

It could be replaced, being on over an acre of land zoned for a c20 storey tower; the Weighted Average Lease Expiry is also short (1.89 years).

Occupiers include Allsports Physiotherapy, Body Corporate Services and Webb Australia.

Knight Frank’s Christian Sandstrom and Matt Barker with Ray White’s Tom Barr and Jason Hines said two of seven offers came from Hong Kong suitors following an expressions of interest campaign targeting owner occupiers and developers.

“The Toowong opportunity generated strong interest from both local and interstate groups looking for existing office buildings that allowed the opportunity to add further value through implementing a repositioning program in addition to longer-term future development upside,” the agents added.

“The purchaser, who only recently settled on the acquisition, believes that as a result of COVID and a rethink by businesses on the most suitable location of their office accommodation, business hubs like Toowong will see an increase in tenant demand”.

Proceeds will be tipped into developing the balance of the site: vendor

State Development and White Partners will use sale proceeds to replace the 9000 sqm site balance with a $450m town centre to be known as The Aviary, with apartments, a childcare centre, gym and hotel (story continues below).

Mr Barr said Queensland is expected to perform better than New South Wales and Victoria in the coming years “with a more resilient economy that is less reliant on the international student market, net overseas migration, and corporate headquarters”.

The state had the highest net interstate migration of any in 2019 – he added.

“Our view is that this will rebound very strongly in 2021 now that interstate border controls have lifted,” according to the executive.

“Lifestyle, climate, and affordability factors are still key drivers, however what has changed is that net interstate migration is not as tied to white-collar employment growth as it has been historically.

“Most employers are now much more flexible in the geography of their staff and work from home policies, so many people can now remain in their Sydney or Melbourne job and live in Brisbane much more easily than they could pre-COVID.

After selling 88 Jephson Street on 4118 sqm, State Development and White Partners will build a $450 million town centre on the balance.

“The current infrastructure boom in South East Queensland will further reinforce Brisbane as an investment destination of choice for domestic and offshore capital.”

The Queensland city, Mr Barr said “would be viewed by investors as even more of a safe haven in the Asia Pacific region given the city’s relative success in containing COVID, the co-ordinated government response and recovery package and its mature medical infrastructure”.

The $450 million town centre proposal was permitted in October.

“This was evidenced by two of the seven offers on 88 Jephson Street, Toowong coming from Hong Kong-based family offices,” he added.

“We have experienced a significant uptick in transactional activity across the market over the past two months or so and anticipate this to continue into 2021”.

Toowong is about five kilometres south west of Brisbane.

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Marc Pallisco

A former property analyst and journalist, Marc is the publisher of realestatesource.com.au.

Marc Pallisco