24/01/2006 - 21:00

Focus shifts to refurbishment

24/01/2006 - 21:00

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With a delay of at least two to three years before the next new major office building features on Perth’s skyline, the refurbishment of lower-grade buildings is attracting the interest of investors keen to capitalise on Perth’s thriving office market.

Focus shifts to refurbishment

With a delay of at least two to three years before the next new major office building features on Perth’s skyline, the refurbishment of lower-grade buildings is attracting the interest of investors keen to capitalise on Perth’s thriving office market.

Colliers International last week confirmed the sale of 95 St Georges Terrace (Alexander Centre) for $10 million to an undisclosed buyer, who intends to refurbish the building before leasing it.

The Alexander Education Group has a short-term lease on the building and it is believed the new owner will undertake the refurbishment on the 13-storey building in coming months.

The building is being sold by Catona Pty Ltd, which bought it for $7.3 million in 1996.

Catona is the company behind the Alexander Education Group, which is controlled by interest associated with education and plumbing contracting magnate, Barry Gregory.

Several other office buildings have been successfully refurbished in recent years, including a $34 million makeover for 140 St Georges Terrace.

The upgrade began in 2003, and ended last year, with the once sparsely occupied building now practically full.

Other recently refurbished buildings include 81 St Georges Terrace and 41 St Georges Terrace.

WA Business News last year reported on developments initiated by the unit trust that owns the May Holman Centre, located at 32 St Georges Terrace. Investors in the trust were asked to vote on an upgrade or conversion of the building into a residential development, at the expiry of the state government’s lease at the end of 2007.

Investors were also offered the option to sell the property if a ‘sell now’ vote was received by more than 75 per cent of unit holders.

The building is currently 100 per cent leased to the Department of Housing and Works and houses various Department of Justice agencies, which will relocate to a new court precinct being developed on the corner of Hay and Irwin streets.

Investors were told in April last year that, as a result of the decline in the property’s value, the loan-to-value ratio was too high, and that the financiers required a reduction of debt.

Research shows that Perth’s CBD office market had the highest absorption in the country last year as a percentage of total market size, at just over 5 per cent.

Colliers director of commercial leasing Ian Campbell said that the tight market is seeing a lot of interest in refurbishments, but limited buildings and none under way yet.

Perth was defiantly a tenants’ market 12 months ago, he said, with incentives of up to 30 per cent. Now, in most cases, incentives are only around 10 per cent and rents were increasing substantially.

“Rents in the CBD are expected to jump significantly in 2006. Incentives have already dropped and next year will see pressure on rents now that the majority of buildings are close to full and the options for larger tenants to relocate have become very limited,” Mr Campbell said.

“There are currently no major new buildings under construction and new supply can not be completed till at least late 2008. With no new supply the market will remain very tight over the next two to three years and even when the first new building is completed it will not be enough supply to meet demand.”

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