With nearly two years’ wait on any significant new office stock in the city, some owners of existing buildings are seeking to maximise returns by spending millions to refurbish and remodel their properties.
With nearly two years’ wait on any significant new office stock in the city, some owners of existing buildings are seeking to maximise returns by spending millions to refurbish and remodel their properties.
The biggest known upgrade is being undertaken by UnitingCare West, which has recently gained approval for an estimated $50 million refurbishment an alteration of its Wesley Arcade Building and historic QBE and Queen’s buildings bordered by Murray, William and Hay streets.
A total of 14,000 square metres of refurbished and new office space will be created across the three-level arcade, two- and three-level Queen’s Building, and 10-storey QBE Building.
Floor plates of 2,500sq m are expected to make the new A-grade stock highly sought after in the lead up to the project’s forecast completion, in mid to late 2008.
Proposed works for the 7,128sq m precinct are understood to include converting the first and second floor arcade voids of the three-level Wesley Arcade Building into commercial tenancies, and the creation of 11 new retail and restaurant tenancies at ground level, activating the space around the 136-year-old Wesley Church.
The existing entrance to the arcade will be re-orientated towards the church, and both buildings will be linked by a landscaped pedestrian promenade with alfresco dining.
Colliers International director of office leasing, Ian Campbell, said many building owners were spending big dollars on refurbishments to take advantage of the anticipated growth in rents before new stock hits the market from December 2008.
“Tenants want to operate in a decent building, and the 12- to 18-month time-frame on a lot of these refurbishments is attractive because there won’t be any significant new built product available in that time,” Mr Campbell said.
He forecast B-grade rents to hit new records of more than $400/sq m during the period.
Mr Campbell said the former Alexander Centre at 99 St Georges Terrace was one of a handful of B-grade properties expected to reap rewards through refurbishments, before its completion in September this year.
The building’s owner Cascadale Holdings, which bought the property in late 2005, is currently replacing lifts, air-conditioning, electrics and toilets as well as remodelling the lobby.
Mr Campbell said he had already received strong inquiry from prospective tenants for one to two floors, and up to 10 whole floors. The property will go to market in May.
Just two blocks down, at 41-43 St Georges Terrace, the eight-storey former Royal & Sun Alliance building is undergoing its own makeover at a cost of $17 million to owner, Primepoint Asset.
By the end of 2007, an extra 2,800sq m of office space and 100sq m of retail will come onto the market.
Further down the terrace, next to St Andrews Church, the May Holman Centre’s refurbishment and expansion plans were approved late last year.
The 16-storey building will have its 9,330sq m of office space boosted to more than 13,500sq m, with the addition of eight new levels of offices to the front of the property.
Two commercial tenancies will be built at street level next to a small public plaza.
Peak Property Holdings managing director Brett Sloane said the company was committed to starting the $15 million refurbishment and expansion in January of 2008 and believed it would greatly enhance the eastern end of the terrace when complete 14 months later.
“We believe the market has a major shortage of quality office space especially for areas of 13,000sq m with 1,000sq m floor plates,” Mr Sloane said.
“The next two years will not improve in terms of vacancy due to the existing supply and what is intended to come onto the market within that period.”
Other major CBD refurbishments to be completed this year include the 20-storey International House at 26 St Georges Terrace, which will have 10,614sq m of office space online within weeks, and the three-storey Russell Centre at 159 Adelaide Terrace, which will retain a net lettable area of 1,929sq m and form part of a new mixed-use precinct.
