100pc interest in Perth's premium Exchange Tower a well-timed opportunity

There are only six A-grade office buildings in the CBD and these are rarely traded.

July 17, 2018

With only one on-market transaction of a premium grade tower in Perth in the past decade, JLL and IncRe have been jointly appointed to offer for sale a 100 per cent leasehold interest in Exchange Tower.

The property is being marketed by JLL's John Williams, Simon Storry and Nigel Freshwater through an expressions of interest campaign.

Exchange Tower is jointly owned by Primewest and the AMP Capital Australia Wholesale Office Fund. The 34,000sqm office tower has recently benefited from an extensive refurbishment program including new end-of-trip facilities, refurbished entrance lobby and upgrades to a majority of the floor areas.

Exchange Tower benefits from a 5.2-year weighted average lease expiry (WALE) and comes to the market at a critical point in the cycle where vacancy is decreasing and rental growth is highly anticipated.

John Williams, Managing Director at JLL WA, said: "The building is offered for sale at a pivotal point in the cycle. Perth CBD has recorded 32,500sqm of positive net absorption in the past 12 months. This makes it seven consecutive quarters of positive net absorption in the market. The premium-grade office market sector has shown great resilience and now has a vacancy of under 9 per cent as tenants seek to upgrade the quality of their accommodation."

Exchange Tower is prominently positioned in a core CBD location adjacent to the $400 million Elizabeth Quay development.

With the Ritz Carlton Hotel and residential towers currently under construction, the area will be further enhanced following the recent announcement of the new headquarters for energy giant Chevron.

Elizabeth Quay has refocused the centre of the city, delivering a concentration of food and beverage amenity to the area which will undoubtedly be an attraction for tenants.

Josh Cullen, of IncRe, said: "in a highly competitive Perth market over the last two years, Exchange Tower has attracted several new high-profile tenants. Due to the investment and capital works and the position of the asset in the marketplace, this has been critical in ensuring the building remains relevant and competitive."

Exchange Tower is released to the market at a time when there is very strong interest in Perth office assets.

Investors are confident that the market is driven by increased activity across many business sectors including mining. This increase in economic activity occurs at a point where the disparity in yields and values between Perth and the eastern states market are at historic levels making Perth a compelling alternative investment opportunity.

Simon Storry, Head of International investments Australia, said: "The Perth value proposition is compelling for counter-cyclical investors with the Perth-Sydney prime equivalent yield spread having widened to 219 basis points being 92 basis points wider than the long-term average, making it attractive for both domestic and overseas investors."

Further positive news concerning WA's recovery is reflected in employment growth.

Some 27,000 jobs have been created since May 2017, with latest WA Treasury estimates forecasting a further 50,000 jobs to be added over 2018-19.

Together with this, consumer and business confidence levels are around four-year highs, signalling optimism is quickly returning within the WA economy.

Recent announcements of investment decisions will see several new mining projects in WA, including BHP's $4.6 billion South Flank project which is set to create around 3000 construction jobs.

In addition, planned funding boosts for tourism, education and public infrastructure should assist in diversification and contribute towards an improved economic outlook for WA.