Commercial Property SPECIAL REPORT Commercial Property Perth CBD ownership (m2) 1,600,000 FEATURE 1,200,000 800,000 400,000 0 2008 2018 Foreign Institutional - Foreign Institutional - Australia WA Private Government Strata Religious Other EXCHANGE TOWER: AMP Capital and Primewest have offered the A-grade tower to the market. Photo: Attila Csaszar Source: JLL - buildings > 5,000sqm, excluding strata important thing to note in the and rents and capital values will Perth office market is there just increase. Perth office market won’t be any new supply for three “The other thing with Perth, it to five years, because that is the is more likely to hit return hur- type of lead times we are talking dles than other capital cities. absorbs foreign funds about for new development. “Most investors have internal “It could tighten pretty quickly rate of return hurdles, which are and that is encouraging us to a mixture of capital growth and The greater volume of funding for commercial take a look, but it is a finite cash returns, so you need capital market and others are also look- returns to get those returns. property is helping drive a push for diversification. ing at it.” “In Sydney and Melbourne the Mr McNeilly said the cost of perception is they have peaked, capital issue was exacerbated by so you are not going to get that increased from 26 per cent in need for diversification,” Mr Wil- tightened lending practices in capital appreciation. 2008 to 41 per cent in 2018. liams told Business News. Australia. “So what other markets are at the Australian institutional “While the foreign capital “Unfortunately Australia is bottom of the cycle where you are investment fell slightly, from 38 might be coming in and buying banked by national institutions going to get some income growth per cent to 36 per cent, and Perth assets, at the same time our cap- that don’t treat Australia as the from rent, as well as growth in cap- private investor ownership fell ital is diversifying into other two-speed economy it is,” he said ital values to hit your internal rate from 17 per cent to 12 per cent. markets, and that is just the way “You tend to have decisions of return hurdles?” Government ownership the world is working these days.” made in the east coast that can Mr Williams said the spread dropped from 14 per cent to 6 per Foreign buyers were also make things very hard in West- between foreign and local inves- cent over the same period. attracted by the transparency of ern Australia.” tors in Perth’s office market was Peter Kermode JLL state manager WA John Australia’s commercial real estate Mr Williams agreed and said not unusual, and would probably [email protected] Williams said the weight of market as well as the relative value the Perth office market was well increase in coming years given foreign capital in the global of WA, helped by the cost of capital. past the worst. current conditions. market compared with 10 years Sirona Capital managing “I think the amount of net Institutional investor Dexus ROOKFIELD Property ago, combined with investors’ director Matthew McNeilly said absorption of office space will is Perth’s second largest land- Partners remains Perth’s desire for greater diversity fol- there was more interest from surprise a lot of people when the lord through its ownership of B biggest commercial land- lowing the GFC, was helping investors in Perth’s commercial numbers are tallied at the end of Woodside Plaza at 240 St Georges lord, with almost 190,000 square to drive the shift in ownership office space now than in the past the year,” he said. Terrace and two towers at Kings metres of office space under its levels. five years. “That will be confirmation Square on Wellington Street. control, as the level of foreign The prospective returns avail- “It’s changing more rapidly that the market is heading in the Local wholesale investor ownership of Perth’s major able from Perth’s commercial than I think anyone had antic- right direction. Primewest, founded by John office buildings continues to real estate sector and a lower ipated; there is lot more tenant “With the current level of Bond in 1994, is Perth’s third increase. cost of capital enjoyed by for- demand and incentives have net-effective rents and capital largest investor in office space, JLL data shows that foreign eign investors were secondary started to come down from an values, we are significantly well although its 50 per cent share of ownership, measured by square factors, he said. incredibly high peak,” he said. below the economic cost of the Exchange Tower is on the market metres of office space in build- “There is a greater amount of “It’s making some deals actu- replacement of buildings, so the and expected to settle before the ings of more than 5,000sqm, capital, and there is a greater ally start to stack up, and the market will ultimately correct end of the year. COMMERCIAL PROPERTY FEATURE MAJOR MOVE: Sirona’s biggest project to date is the $270 million Kings Square development in Fremantle. Sirona positive on Perth growth Taking a long-term view of WA’s development potential is paying off for Sirona Capital. Peter Kermode in and around Perth, which a number of areas, but we have [email protected] prompted its earlier investments managed to build a business even in Bullsbrook and Muchea, now against those. My view of Fremantle is IN a landscape dominated by held by Sirona spin-off Harvis Sirona’s biggest project, the [that] taking 1,500 government national institutions and foreign Corp. $270 million Kings Square devel- owners, local property investor Sirona also has a focus on stra- opment in Fremantle, is under office workers there will support and developer Sirona Capital tegic metropolitan centres and construction and scheduled for stands out as an active player in the potential to create urban completion in early to mid 2020. additional commercial activity the broader Perth and Western renewal, which helped drive its The Kings Square development Australian property investment biggest investment to date in will create 20,000 square metres - Matthew McNeilly sector. Fremantle. of office space – leased to the With a background in real Related and supporting themes Department of Communities – additional commercial activity,” further opportunities now to help estate funds management and include WA tourism opportuni- across two buildings, as well as Mr McNeilly said. meet an improving future market. investment banking, Sirona ties, based on Mr McNeilly’s belief retail facilities, refurbishment of “Many ancillary suppliers will “My level of confidence now is co-founder Matthew McNeilly that the state offers a unique the 830-bay, multi-deck Queens- want to relocate near to Depart- probably as high as it has been in said the group was focused on tourism experience to travellers, gate car park, and a new City of ment of Communities and there five years and we can certainly developments to create income and participating in opportuni- Fremantle administration centre. is almost no contemporary office see that the tide has turned,” he generating assets and was willing ties that create density within Sirona’s big investment in the accommodation in Fremantle at said. to take a long-term view. greater Perth, in step with current port city (it also developed and all.” “I think there is a general level “It’s what I describe as an insti- government policy. owns the Quest Hotel in Freman- Sirona also has a residential of confidence across the market tutional model rather than a Finally, Sirona invests in assets tle) is being followed by other development pipeline around being fuelled by new investments wholesale or retail type model,” that are resilient and able to sur- opportunities. Fremantle. we have seen in mining projects. Mr McNeilly said. vive economic troughs. The Quest Hotel was completed “It’s a natural progression from “Typically there will be a 12- to Since launching in 2010, Sirona “Key to our investment in December 2016 with operator what we have done in the com- 24-month lag before you see that has made investments based on approach is it has to be able to Quest on a long-term lease. mercial space,” Mr McNeilly said. playing out in real estate, but it several macro-economic themes. survive cycles,” Mr McNeilly said. Sirona controls the Adelaide “My view is people are going to feels to me like there is better “It’s no accident we have ended “Cycles in Perth come and go, Street shopping centre and has want to live there once the urban prospectivity around things like up with a pretty diversified portfo- but they tend to be much shorter recently agreed the surrender of renewal has taken hold.” population growth than there lio of real estate assets as a result,” and sharper here, so you have to the lease by Woolworths. Mr McNeilly is optimistic on has been for some time and that Mr McNeilly told Business News. build a pretty robust and diverse It is aiming to repurpose the Perth commercial and residen- ultimately will lead to positive “We are not beholden to a spe- business model to, not only suc- building, most likely as further tial real estate and is scouring for outcomes for real estate.” cific asset class.” ceed, but to survive. office space. Sirona’s first investment theme “We have just had as tough “My view of Fremantle is SEARCH Sirona Capital is based on the general shortage a five years as I can remember [that] taking 1,500 government There are 111 results from our index of 96,522 articles, of large lot industrial land supply with significant headwinds in office workers there will support 9,570 companies and 34,660 people FEATURE COMMERCIAL PROPERTY Brookfield Bishop’s See builds for the future Commercial property player and Perth’s biggest landlord, Brookfield, is building on its success across the city with big plans and a strategic focus.