- 99 Frome Street is close to Lot Fourteen and Hindmarsh Square.
- Sale comes amid heightened private HNW investor interest.
- The office is currently 79% occupied.
The 99 Frome Street property has been acquired for $13 million. It is the first time the property has come to market since construction, with the office comprising 3,432 square metres (sqm) across three storeys, and 56 basement car parks.
The Adelaide office is 79% occupied, including O’Loughlin’s Lawyers and ElectraNet; the ground floor is vacant.
“Once fully occupied, the asset is estimated to generate an annual income stream of $1,152,127,” said Colliers‘ Rhys Newman, who sold the property with Alistair Mackie and Paul van Reesema.
“The property will enjoy the increased activity and demand through the eastern precinct and is well located to capitalise on the overflow of tenant requirements,” added Newman.
The $672 million Lot Fourteen project on North Terrace is a nearby urban renewal project that focuses on space, defence, technology, and entrepreneurship.
“It was a highly competitive campaign with over 85 enquiries, 12 inspections and six offers, clearly indicating a strong appetite for opportunities in the sub $20 million sector, with value-add potential,” said Mackie.
He added that the flight to quality remains strong in the Adelaide CBD, with vacancy rates continually tightening for quality, A-grade offices.
“… 78% of the deals [are] attributed to businesses expanding or upgrading. A trend that is expected to continue during the second half of 2023,” said Mackie.
“Savvy investors seek opportunities to reposition older generation office buildings that appeal to the broader market while offering the genuine potential to create added value for hands-on and sophisticated investors.”
High net worth investors up the ante
Newman observed that investor sentiment is generally subdued, with inflation and cost of debt outweighing news of improved leasing activity.
“However, a significant amount of investment capital in the market is looking to be placed,” added Newman.
The strong recovery of Adelaide’s office market at the back of the pandemic has seen the market pivot towards assets with a narrative to create value, as opposed to pure passive investment.
“We have recently seen more private high net worth investors competing more aggressively in the current market and benefitting from the strong economic fundamentals, underpinning the demand for commercial office in the resilient South Australian market,” said Newman.