Office Investment

Market Review
January 2009 – March 2010
Australia
Highlights
The 2009 Australian Office
Investment Market
Global economic uncertainty and tight
credit conditions continued to cast
a shadow over the Australian office
investment market in 2009. However, the
Australian economy proved to be resilient,
avoiding a technical recession in 1Q09,
followed by three successive quarters of
positive GDP growth (2Q09 to 4Q09).
In the second half of 2009, the improving
economic conditions and relatively solid
office market fundamentals provided
greater confidence to both local and
overseas investors.
The first half of 2009 followed the trend of
2008. Buyers remained cautious, although
low interest rates and higher yields
encouraged activity from private investors
as the projected returns were above
historical benchmarks for office buildings.
2 Jones Lang LaSalle | Office Investment Market Review
A distinct price point was observed in capital raisings by large A-REITs from
early 2009. There were no transactions institutional investors generated positive
above AUD 60 million recorded in the sentiment in the office sector. It was
first quarter. estimated that the A-REITs successfully
raised AUD 14 billion in equity capital
While the level of stock in public on-market
in 2009. With these capital raisings, a
campaigns was low in early 2009, there
number of institutional owners started to
were high levels of stock available on
reconsider their positions and pulled their
an off-market basis. Institutional owners
properties from the market. As the year
were quietly willing to consider offers on
progressed, the positive sentiment created
properties across their portfolios with a
by the recapitalisation of the sector and
view that property fundamentals would
the firm market fundamentals started to lift
deteriorate and capitalisation rates would
the shadow that was cast over the office
move out further. With this supposed
sector and gave fund managers room to
approaching storm, offshore groups
strategise and reconsider their positions.
became more interested in the Australian
In late-2009, the market started to see the
property market, thinking that they will
return of the Wholesale and REITs with
be able to pick up quality property at
increasing number of buy mandates.
distressed prices.
In 2009, access to debt financing
Declining asset values led to a number
remained difficult. While the official
of A-REITs approaching (or breaching)
interest rates were at historic lows,
loan covenants. However, successful
financing costs had significantly settled in 2008, while the 2009 figure did million) and 2007 (AUD 39.75 million).
increased, with spreads above bond not include a number of large transactions While the average size of transaction was
rates at up to 400 basis points plus that entered due diligence towards the end comparable in both 1H09 (AUD 34.73
facility fees. The ability to acquire ‘club of the year. million) and 2H09 (AUD 35.50 million), the
debt’ stalled, and many banks’ new loans number of transactions increased from 45
The average transaction size of AUD
facilities for commercial property had to 62 in 2H09.
35.12 million remains well below the
stopped. For those groups that were able
figure recorded in 2006 (AUD 45.39
to source debt, the rules had changed.
Banks’ loan-to-value (LVR) ratio and
debt coverage ratios had become more Figure 1: Total Office Transactions
stringent. Banks were no longer lending $8,000 200
on property or projects that were not solid $7,000 175
opportunities and the ability to acquire $6,000 150
debt above AUD 50 million was scarce. $5,000 125
$4,000 100
Jones Lang LaSalle recorded 107 major $3,000 75
(over AUD 5 million) office transactions in $2,000 50
2009, totalling AUD 3.76 billion (Figure 1). $1,000 25
Both the number and value of sales were $0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
comparable to 2008. It is worth noting that
Value Number
the 2008 figure was inflated by a number
of large transactions earlier that year that Source: Jones Lang LaSalle

were actually negotiated in 2007 and

Jones Lang LaSalle | Office Investment Market Review 3

Victoria and Queensland dominated
transaction activity in 2009, accounting
for 27.7% and 21.3% of the total value
of transactions recorded. The positive
fundamentals of the Melbourne office
markets and the availability of assets
at the private investor price point were
the main drivers for strong activity
in Victoria. Interestingly, there were
a number of purchases made by
overseas-based private investors, and
a heightened interest from participants
will limited exposure to the Australian
property market. Activity in Queensland
was driven by local private investors, a
number of whom disposed of assets in
the 2006–2007 boom and re-emerged as
active purchasers.
Similar to 2008, there were fewer large
transactions (greater than AUD 100
million). In total, seven assets above AUD
100 million were transacted compared
with an average of 15 per annum between
2003 and 2007. The reduction in larger
transactions and a strategy to dispose of
assets in markets outside of Sydney is part
of the reason for the reduced sales volume
in New South Wales, which accounted
for 19.5% of transactions by value. New
South Wales is seen as a barometer for
the sentiment of the wider market, and
the turnaround in sales from AUD 112
million in 1H09 to AUD 623.5 million over
2H09, coupled with the increased number
of settlements in early 2010 reflects the
increased optimism in Australia.
On average, indicative equivalent yields
appear to have stabilised for prime assets.
Indeed, a number of December 2009
valuations showed capitalisation rate
compression for well-leased prime assets.
4 Jones Lang LaSalle | Office Investment Market Review
In 2010, additional institutional investors 1990s took three years to progress from
are expected to re-enter the market and the peak (1990) to the trough (1993).
overseas investors will become more
With investors believing that the bottom of
prevalent as it is now clear that distressed
the cycle has occurred, transaction activity
quality core assets will not appear on
improved in late 2009 and a number of
the market. Increased competition for
properties have reached settlement in the
assets, risk premiums above historical
first part of 2010.
benchmarks, the stabilisation of debt
markets and the prospect of strong With the Sydney CBD office market at
medium-term rental growth could lead the trough in terms of effective rents and
to yield compression by late-2010. With the peak for equivalent yields, investors
greater depth to the buyer pool, the total have looked to capitalise on the bottom
and average value of transactions is of the cycle. There were five recorded
predicted to increase over the next transactions in the Sydney CBD totalling
12 months. AUD 944.1 million. The largest transaction
to complete in 2010 was the NPS of
What has happened so far
Korea purchase of RBS Tower @ Aurora
in 2010?
Place at 88 Phillip Street, Sydney for
Respondents to the latest Jones Lang
LaSalle Survey of Investor Sentiment AUD 685 million.
(November 2009) believe that the overall Interestingly, a number of offshore groups
real estate market is currently at the have made their first entry into direct real
bottom of the property cycle (Figure 2). estate in Australia. K-REIT purchased a
The shift in investor sentiment has been 50% stake in 275 George Street, Brisbane
rapid from the late upturn stage in 2007, to for AUD 166.0 million, while Aviva
an early downturn in 2008. In comparison Investors purchased 80 Clarence Street,
the property market downturn of the early Sydney for AUD 29.5 million.
Figure 2: Total Office Transactions
6 1 Early Downturn 6
2 Late Downturn
3 Trough Nov ’01 (6.0)
4 Early Upturn May ’99 / May ’01 /
5 Late Upturn Nov ’00 / Nov ’04 /
1 5 Jun 04 / Nov ’05 /
6 Peak Jun 05 / Nov ’06 (5.0)
Nov ’98 (4.9)
Nov ’08 (1.4) May ’00 (4.7)
Nov ’99 (4.6)
May ’97 / Nov ’97 /
May ’98 (4.3)
2 4 May ’95 / Nov ’94 (4.1)
Nov ’03 / May ’03 /
Nov ’02 / May ’02 / (4.0)
May ’91 (2.4) Nov ’95 / May ’96 / May ’94 (3.9)
Nov ’91 (2.5) 3 Nov ’93 (3.2)
Nov ’92 (2.7)
May ’92 (2.8) Nov ’09 (3.0)
May ’93 (2.9)
These figures show the position on the cycle based on the median of responses.
Source: Jones Lang LaSalle
2010 Major Office Transactions – Q1 (greater than AUD 15 million)

2010 Sales
Property Name Address Suburb Month Sale Price Initial Yield NLA (SQM) Rate ($ per sqm) Vendor Purchaser
New South Wales
RBS Tower @ Aurora Place 88 Phillip Street Sydney Mar-2010 $685,000,000 6.6% 45,328 $14,009 Commonwealth Property Investment Trust NPS
55 Hunter Street 55 Hunter Street Sydney Feb-2010 $106,100,000 ~7.0% 13,622 $7,789 ISPT Core Fund City Freeholds
80 Clarence Street 76-80 Clarence Street Sydney Feb-2010 $29,500,000 8.0% 5,481 $5,382 Oakland Property Holdings Pty Ltd Aviva Investors Asia Pacific Property Funds
8 West Street 8 West Street North Sydney Jan-2010 $19,000,000 10.1% 6,028 $3,094 Becton Office Fund Property Bank Australia & Security Capital Corporation
60 Martin Place (50%) Sydney Feb-2010 $95,000,000 8.0% 27,855 $6,821 Martin Place Property Trust Gwynvill Group
52 Alfred Street Milsons Point Jan-10 $51,000,000 ~8.0% 10,219 $4,991 Colonial Direct Property Investment Fund Lipoma Pty Ltd
107 Mount Street North Sydney Jan-2010 $33,000,000 8.0% 6,201 $5,130 Century Funds Management Undisclosed Private Investor
Victoria
Myer Headquarters 800 Collins Street Docklands Mar-2010 $76,870,000 7.7% 28,676 $5,213 Australian Prime Property Fund SEB Asset Management
1 Spring Street Melbourne Mar-2010 $67,000,000 7.5% 31,776 $4,217 Record Realty Highpoint Property Group
357 Collins Street 357 Collins Street Melbourne Mar-2010 $45,000,000 N/A 21,455 Development Maxicity Australand
(Former Stock Exchange House)

383 King Street West Melbourne Jan-2010 $34,000,000 8.1% 12,989 $2,618 Trinity Stapled Trust/Trinty Property Trust Henkell Brothers Australia Pty Ltd
171 Collins Street 171 Collins Street Melbourne Mar-2010 $15,500,000 N/A Development Charter Hall Office REIT CBus Property
Queensland
275 George Street (50%) Brisbane Jan-2010 $166,000,000 7.0% 40,317 $7,952 Charter Hall Core Plus Office Fund K-REIT Asia (Australia) Trust
Navision House 10 Market Street Brisbane Jan-2010 $34,254,000 10.2% 6,850 $4,803 Heathley Diversified Property Fund GDI No. 33 Brisbane Office Trust
South Australia
Hp House 148 Frome Street Adelaide Feb-2010 $17,600,000 5.0% 4,680 $3,761 ISPT Core Fund Local Government Association of South Australia
Economic Overview
The Australian economy avoided a Figure 3: Real GDP Growth, Advanced Countries, 2009
technical recession in 1Q09 and recorded Annual GDP Growth
positive growth figures in each quarter. 2%
1%
The Economist Intelligence Unit (EIU) 0%
estimate economic growth of 0.9% for -1%
-2%
Australia in 2009, making Australia and -3%
Korea the only major advanced economy -4%
-5%
(out of 33 countries) to record positive
-6%
Japan
Germany
Denmark

United Kingdom
Czech Republic
Netherlands
Spain
Taiwan
Austria
Hong Kong
Belgium
Greece
United States
Canada
France
Singapore
Switzerland
Norway
Korea
Australia
Italy
GDP growth over the calendar year
(Figure 3).

A number of factors have contributed

to the performance of the Australian
economy. The swift policy response
was highlighted by the Reserve Bank of
Australia aggressively cutting the official
cash rate by 425 basis points from
September 2008 (7.25%) to April 2009
(3.00%) and the Federal Government’s
various policy measures, including direct
transfer payments to tax payers and
longer-term investments in infrastructure.
To put the fiscal policy spend in
context, the Federal Government spent
approximately 5.4% of GDP on the various
stimulus measures. This figure was one
of the highest in the OECD, only behind
South Korea (6.1%) and the US (5.6%).
After reaching a low of 3.9% in February
2008, unemployment rose 1.8 percentage
points to 5.7% by March 2009. Job losses
were concentrated in the finance and
insurance and property and business
services sectors, resulting in a rise in
sub-lease availability as major office space
occupiers restructured, consolidated and
released excess space to the market.
From 3Q08 to 2Q09, sub-lease vacancy
increased by 1.6 percentage points to
2.1% of total stock.
Source: EIU
The resilience of the domestic economy and are willing to retain hidden vacancy in
has supported labour markets and the their real estate portfolios in anticipation
underlying demand for office space. of growth over the next two to three years.
Unemployment fluctuated through the Consequently, sub-lease availability
course of the year before tightening declined to 1.8% of total stock in 4Q09
to 5.6% in December 2009 and 5.3% and is expected to decline towards the
in February 2010. The unemployment 20-year average (1.1%) through the
rate masks the growth in the Australian course of 2010.
workforce, which has increased from
The Australian economy is forecast to
10.79 million in March 2009 to 10.94
rebound strongly and Access Economics
million in January 2010.
project growth of 2.5% and 3.5% in
Business confidence has staged a 2010 and 2011. As the economic
recovery in the second half of 2009. The
NAB Business Survey (February 2010)
showed confidence was at an 8-year
high. The majority of corporations are no
longer exploring sub-lease opportunities

6 Jones Lang LaSalle | Office Investment Market Review

recovery gathers momentum, this will
precipitate an upturn in employment
growth for the key industry sectors
and demand for office space (Figure
4). This recovery is supported by the
strengthening of lead indicators such as
the ANZ Job Advertisements series and
the employment component of the NAB
Business Survey.
While the outlook for the Australian
economy is positive, some negative points
remain. Credit markets are improving,
but the cost of debt as illustrated by
the spread between corporate and
government rates remains high. Overseas,
the Chinese government is tightening
bank lending criteria in response to
overvalued asset prices and excess
capacity in industry sectors, including
steel production, aluminium smelters
and concrete. In the US, unemployment
remains at 10.0% and private sector
demand remains weak.
The Changing Nature of Tenant Sentiment
The economic recovery is reflected by the improvement in
conditions across the office markets. Leasing enquiries reached a
cyclical low in June 2009 and have staged a remarkable turnaround
over the second half of 2009, increasing by between 10% and 50%,
depending on the market.
Businesses are increasingly willing to make long-term capital
investment decisions, including real estate relocation decisions.
The rising level of enquiry is a precursor for increased leasing
transactions, which are starting to recover and will improve further
in 2010.
Kevin George
Head of Leasing – Australia
Figure 4: Employment Growth, Key Industry Sectors
y-o-y% Change
6%
4%
2%
0%
-2%

-4%
2008 2009 2010 2011 2012
Finance & Property & Communication Public
Insurance Business Services Services Administration

Source: Access Economics

 Review of 2009
Vendors
Capital values fell by an average of 20%
to 30% for prime office assets between
December 2007 and December 2009.
A number of A-REITs approached (or
breached) loan covenants, although
lenders were reluctant to force asset sales
while buildings managed to maintain
high occupancy rates and were cash flow
positive. Refinancing activity continued
with the Reserve Bank of Australia
(Financial Stability Review, September
2009) stating that the larger A-REITs had
successfully refinanced AUD 24 billion
of debt since January 2009. Meanwhile,
commercial mortgage backed securities
markets (CMBS), which traditionally
provided some diversification in funding,
remained all but closed—although real
estate firms have generally been able
to replace this financing facility mainly
through bank loans. Essentially, A-REITs
were able to rollover debt finance,
however the spreads increased.
Whilst they were able to rollover debt
finance, the larger A-REITs were also
successful in raising equity capital to lower
gearing ratios. It is estimated that A-REITs
raised AUD 14 billion in 2009. There was
a disparity with the larger A-REITs with a
quality portfolio of assets more successful
than the smaller A-REITs that were
weighted towards secondary assets.
Consequently, the volume of asset sales
by A-REITs was lower than expected
in 2009. They remained net sellers of
commercial property; however, there was
limited evidence of distressed vendors
even if some were highly motivated.
8 Jones Lang LaSalle | Office Investment Market Review
In 1H09, the groups in the market that had
cash or access to cash, mainly private
and offshore investors, were active.
This was due to the perceived unique
opportunity to acquire good quality assets
across Australia at relatively soft prices.
While little on-market campaigns were
conducted, the number of properties
being discussed off-market was high.
A clear vendor–buyer gap still existed,
however as time went on, this gap
started to close. The narrowing proved
to be short lived. In 2H09, a number of
A-REITs started to withdraw assets (prime
assets in particular) from sale, while
pricing started to firm towards end-2009
– in some instances, above June 2009
valuations. Through the course of 2009,
A-REITs accounted for 11.1% of the total
transactions by value.
The immediate fix of a rights issue was
not readily available to unlisted property
trusts. Hence, the primary strategy for
this sector to deal with refinancing and
covenant issues and in some instances,
to deal with clients’ redemption issues
was to sell assets. In 2009, the unlisted
sector accounted for 48.0% of recorded
transactions (by value).
Developers and property companies were
net sellers in 2009, accounting for 16.6%
of vendors by value. Private investors
continued to be active on both sides of
the ledger and accounted for 7.0% of
transactions by value.
Although offshore investors were net
purchasers of commercial property, a
number of offshore groups reduced
their exposure to the Australian market.
Offshore investors represented 7.2%
of vendors by value. The Grosvenor
Group disposed of 20 Hunter Street,
Sydney for AUD 77 million and 25
Smith Street, Parramatta for AUD 48.4
million; while UK fund manager New
Star Asset Management exited Australia
after the disposal of 414 LaTrobe Street,
Melbourne for AUD 49.5 million.
Although syndicates only accounted
for 3.8% of the vendor type by value, a
number of highly leveraged syndicates
are scheduled to reach maturity over the
next three to four years and further asset
disposals are likely.
Purchasers
Following on from the re-emergence
of private investors in 2008, this cohort
was the main purchaser type in 2009,
accounting for 37.7% of transactions by
value. Private investors were active in the
sub AUD 60 million price category and
the average price transacted by private
investors was AUD 24.9 million with the
median transaction even lower at AUD
14.5 million. Approximately 36.9% of the
purchasers made by private investors
were in Victoria. These included 215
Spring Street (AUD 59 million) and 414
LaTrobe Street (AUD 49.5 million). In
contrast to other markets where private
purchasers were locally based, a number
of transactions in Melbourne were made
by overseas-based private investors.
Activity from private investors was strong
in Queensland, accounting for 8.6% of
total purchases or AUD 322.8 million,
including the HSBC Building at 300 Queen
Street (AUD 109.65 million) and the ICB
Centre at 15 Butterfield Street, Herston
(AUD 67.5 million).
The investment case for Australia
was strong in 2009. Around 22.5%
of transactions recorded an offshore
purchaser (private and institutional).
The strong macroeconomic environment
and excellent market transparency
were highlighted by offshore investors
seeking to gain an exposure to the
Australian commercial property market.
The due diligence process increased as
offshore investors looked to reduce their
unsystematic risk, focusing on a number
of factors, including the employment base
and growth forecasts, income level and
growth and vacancy rates, as well as the
characteristics of the individual property.
Victoria (25.8%), the ACT (25.4%) and
New South Wales (25.3%) were the main
destinations for overseas investments
in 2009.
Deka Immobilien purchased two assets:
15 William Street, Melbourne (AUD
167 million), and the ATO building at 45
Francis Street, Northbridge, WA (AUD
95 million); while the Swiss-based AFIAA
purchased the Atrium at 60 Pyrmont
Street, Pyrmont, NSW (AUD 137 million).
Asian interest remained strong with
notable purchases including 20 Hunter
Street, Sydney (AUD 77 million) by CLSA.
In the second half of the year,
opportunistic offshore groups realised that
they had to realign their pricing as the
stock started to dry up and funds started
to recapitalise. This, coupled with the
increase in value of the Australian dollar
against major currencies, has affected
the ability of some groups to invest into
Australia, and subsequently, we saw the
departure of some opportunistic investors.
 Sales campaigns
in late-2009 and
early-2010 showed
the first signs of the larger
A-REITs and Wholesale trusts
seeking to re-enter the investment
market. Many of these groups came to
the market with strong ‘buy’ mandates
from their investors with their major debt
issues behind them. A-REITs accounted
for 11.0% of the purchaser type by
value, but this figure was inflated by the
Commonwealth Property Office Fund
purchasing 145 Ann Street, Brisbane
(AUD 208.1 million) and a 50% stake of
54–58 Mounts Bay Road, Perth (AUD 95
million) in late 2009.
Prior to the current downturn, the last
major correction in property values
happened in the early 1990s. After that
downturn, syndicates became a preferred
vehicle with defined investment periods,
set distributions, struck interest rates
and, on occasion, established hedging
strategies. The market upswing between
2004 and 2007 led to an evolution in the
type of syndicated vehicle with a number
of open-ended syndicates comprising
of multiple properties diversified across
sectors and financed through mortgage transactional evidence suggests that
backed securities and mezzanine debt investors did not value vacant space when
products. Syndicates accounted for 10.2% purchasing assets in 2009. This sentiment
of transactions in 2009, but there was was also reflected in the lending practices
a return to the single building syndicate of major lenders. The ability to access
of the early 1990s focused on yield and debt financing was difficult and assets
potential for income growth (Figure 5). that had moderate to high levels of risk
were problematic to finance. Therefore,
Product
investors typically avoided assets that had
Investors remained risk-conscious in 2009
a higher vacancy risk or short weighted
and focused on income return, especially
average lease expiry (WALE) and looked
as yield decompression continued through
for assets with a strong tenant mix and
the first half of the year. Investors do
income growth potential.
not earn income on empty space and
Figure 5: Buyer and Seller Types in 2009
Others
Institutions
Syndicates
A-REITS
Developers /
Property Companies
Offshore Investors
Private Companies
and Investors
Unlisted
Property Trusts
0% 10% 20% 30% 40% 50%
Buyer Vendor
Source: Jones Lang LaSalle
Some of the characteristics of assets that
investors have typically been searching
for include:
• Prime or good quality B grade assets;
• Strong covenant to blue chip tenant(s)
or public sector occupiers;
There was a reduction in the volume
of larger transactions in excess of AUD
100 million. Financial institutions were
unwilling to take on such large exposures,
and there was limited evidence of
syndicated lending. Furthermore, a higher
proportion of equity was required to fund
purchasers compared with the 2004–2007
period. As a result, there were only seven
transactions above AUD 100 million in
2009, compared with an average of 13
transactions between 2003 and 2007.

• Well structured , long weighted average Figure 6: Transactions by Market and Average Value
lease expiry;
Share of Transactions Average Value
• Attractive income growth potential 0.3 42,500,000

through fixed rental increases; 0.25 40,000,000

37,500,000
• Showed good value with the potential 0.2
for medium-term yield compression; and 35,000,000
0.15
32,500,000
• In some cases, repositioning potential. 0.1
30,000,000
Breaking down the sales by market, 0.05 27,500,000
investment activity in Victoria and
0 25,000,000
Queensland was relatively firm, in part VIC QLD NSW ACT WA SA
reflecting the availability of assets as the Total Share Average Transaction Size

price point desired by private investors. Source: Jones Lang LaSalle

Furthermore, the vendor was typically
an unlisted property trust or A-REIT that
had an investment strategy to dispose of
assets in non-core locations.

Comparing the different states, Victoria

and Queensland accounted for 27.7%
and 21.3% of all transactions by value.
This was followed by New South Wales
(19.5%), ACT (12.9%), WA (10.3%) and
SA (8.3%) (Figure 6).
Yields
Yield decompression that started in 2008
continued through the 1H09, before
slowing in the second half of the year.
It appears that the process of yield
adjustment has occurred for prime assets.
A cyclical reversal of rental growth, rising
vacancy and rising risk premium for
commercial property (and other asset
classes) were the main drivers pushing
yields higher in 2009. Through 2H09,
the clouds around each of these factors
started to lift. Rents stabilised in the
The exception is Canberra where prime The current downturn highlighted the
financial centres (Sydney and Melbourne),
yields have moved out by an average of ‘mispricing’ of risk in the commercial
while the rate of decline is slowing in the
125 basis points. Investor risk aversion is sector, cumulating in the spread between
resource-dominated markets (Brisbane
highlighted by the disproportionate interest prime and secondary assets compressing
and Perth), vacancy pressures are starting
in the Canberra market from offshore to the tightest level on record in late-2007.
to moderate with the cyclical vacancy peak
investors and domestic private investors Greater yield decompression has been
being revised down, while risk aversion on
who have sought out counter cyclical recorded for secondary assets, and in
many indicators such as corporate bond
opportunities with strong covenants, long most markets, the re-establishment of the
spreads, appear to be subsiding.
lease terms and high NABERS energy historical prime/secondary yield spread
Since peaking in 4Q07, yields have ratings. In this regard, there are few has occurred (Table 1).
softened across all markets by between commercial markets in the world with
175 and 200 basis points for prime assets. characteristics similar to Canberra.

12 Jones Lang LaSalle | Office Investment Market Review

Australian CBD office markets have
shown a strong positive relationship with
the inflation-adjusted bond rate. The
market downturn and rising investor risk
aversion resulted in prime equivalent
yield decompression and a rise in the
risk premium. The real bond rate has
stabilised slightly below 3.00%, resulting
in an implied risk premium above the
long-term average in all CBD office
markets (except Canberra) (Figure 7).
Based on this valuation benchmark, prime
assets are in fair value to cheap territory
and we expect the historical risk premium
to be re-established in 2010 and 2011 as
investor confidence increases.

Market Balance
Figure 7: Equivalent Investment Yields and Real Bond Rate Spread
The national vacancy rate increased by
2.5 percentage points to 8.0% in 2009. Basis Points
700
As the CBD office markets approach a
600
point of inflexion, the headline vacancy
rate remains within the 7% to 8% band 500

generally regarded as equilibrium for the 400

national markets. Completions across the 300
national office markets peaked in 2009
200
with approximately 659,200 sqm
100
of new and refurbished space entering 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
the market. Adelaide Brisbane Canberra Melbourne Perth Sydney

Source: Jones Lang LaSalle

2009 was a year of two halves for the
Sydney CBD office market. Negative
net absorption was recorded in 1Q09
and 2Q09 as tenants contracted and
sub-lease availability continued to rise.

Jones Lang LaSalle | Office Investment Market Review 13

The market recorded four successive
quarters of negative net absorption (3Q08
to 2Q09) totalling 194,700 sqm, or 4.1% of
total stock. From a demand perspective,
conditions in the Sydney CBD were
weaker than the early 1990s. However,
the rise in vacancy was stemmed by a
reduction in total stock. Vacancy rose
from 7.5% in 2008 to 8.9% in 2Q09
before tightening to 8.2% by year-end as
the tentative recovery in tenant demand
resulted in positive net absorption (22,100
sqm) for 2H09.
From a demand perspective, Melbourne
was the stand out performer. Net
absorption totalled 64,000 sqm in 2009 led
by pre-commitments to new developments
and the continued net flow of tenants
from the fringe and suburban markets to
the CBD. Vacancy increased from 5.3%
in 2008 to 6.4% in 2009 as backfill space
became available from the completion of
153,200 sqm during the year.
After an extended period of below average
vacancy, completions totalled 222,200
sqm in the Brisbane CBD, equating to
12.3% of total stock. Approximately 80% of
the space was pre-committed or leased by
year-end and net absorption was 63,600
sqm. However, restrained tenant demand
for backfill space resulted in vacancy rising
by 6.4 percentage points through the year
to 10.2%.
Similar to Brisbane, completions in the
Perth CBD were strong (92,200 sqm),
pushing the headline vacancy rate out to
7.7%. Negative net absorption (–7,100
sqm) was recorded in 2009, although there
14 Jones Lang LaSalle | Office Investment Market Review
2010 will continue the strong ending to 2009, which marked
the return of A-REITs and Superannuation funds to the investment
market. This, combined with the continuation of offshore buyers
looking to gain exposure to the Australian commercial market, will
see the depth of demand for prime assets continue to increase. The
recent campaign for RBS Tower @ Aurora Place provided an insight
into the level of investor demand for a rarely traded premium asset.
The fundamentals of the Australian office markets remain
positive and the prospect of yield tightening over the short to medium
term as historical relativities are restored is expected to drive total
returns above the long-term benchmark in Sydney and Melbourne.
John Talbot
Head of Capital Markets – Australia
was a noticeable turnaround in sentiment Canberra recorded another year of strong
in the second half of the year with the completions in 2009 (99,900 sqm). Tenant
approval of the Gorgon Gas development demand was subdued in 1H09, but
precipitating a strong recovery in leasing recovered in the second half of the year as
enquiry. the growth in the public sector translated
into positive net absorption. Vacancy
With a moderate development pipeline
peaked at 9.4% in 2Q09, before tightening
and soft tenant demand, vacancy in
to 8.5% by year end (Figure 8).
the Adelaide CBD drifted out by 4.4
percentage points through 2009 to 8.2%.
Despite the rise in vacancy, the current
figure remains below the 10-year average
(8.8%).
Figure 8: CBD Office Markets, Vacancy Rates
National
Brisbane
Canberra
Sydney
Adelaide
Perth
Melbourne
0% 2% 4% 6% 8% 10% 12%
Dec-07 Dec-09
Source: Jones Lang LaSalle
What does 2010 hold?
Market Fundamentals
Yields – The outlook for prime yields
has improved as rents approach the
trough in the current cycle. In previous
market recoveries, investment yields have
tightened on the expectation of rental
growth. Furthermore, yields over-correct
during market downturns. Valuation
benchmarks such as the spread between
the property yield and the real bond rate
indicate that prime assets in CBD office
markets are in cheap territory with the
risk premium between 40 (Adelaide)
and 110 (Melbourne) basis points above
the 10-year average. The exception is
Canberra where counter cyclical drivers
and a re-rating of the market have
ensured that investor activity remains
strong.
Base Office Demand – There has been
an improvement in the lead indicators
for office demand in late-2009. The NAB
monthly Business Survey (February 2010)
showed that confidence rebounded to an
eight-year high, while the employment
component of the survey continues to
improve and is now above long-term
averages. Furthermore, the ANZ Job
Advertisements Series (February 2010)
noted that job advertisements troughed
in July 2009 and were up 28% through
February. The improvement in these
surveys is reflected in Access Economics
outlook for employment growth in the
finance and insurance and property and
business services sectors at 3.2% and
4.1% in 2010.
The upturn in business confidence
precipitated a recovery in leasing enquiry
figures. All markets recorded increased
enquiry levels in the second half of
2009, and leasing activity is expected
to improve as tenants take advantage
of the softer rental market conditions
and the availability of prime contiguous
space to upgrade or consolidate their real
estate requirements. Consequently, net
absorption across the CBD office markets
is forecast at between 225,000 sqm and
275,000 sqm in 2010, above the 48,400
sqm recorded in 2009.
Supply – Total completions across CBD
office markets in 2010 are forecast to
be strong at 622,500 sqm, slightly down
from the levels recorded in 2009 (660,000
sqm). Almost 55% of the space under
construction is pre-leased. Completions
are forecast to be strong in Canberra
(160,100 sqm), Perth (136,500 sqm),
Sydney (126,500 sqm) and Melbourne
(118,200 sqm). Completions will slow
from the record levels in Brisbane
(72,900 sqm), while there is minimal new
development in Adelaide (5,420 sqm).
Access to development finance remains
difficult while major occupiers have been
reluctant to pre-commit. Furthermore,
the rise in capitalisation rates has raised
the rent required for developer feasibility
models. Only seven new developments
in excess of 10,000 sqm commenced
in 2009 and given a lead time of 24–30
months for a major CBD development,
short to medium-term supply additions
are forecast to be relatively benign. At the
onset of the credit crunch in late-2007,
Jones Lang LaSalle Research forecast
supply additions of 1.48 million sqm
between 2011 and 2013, a figure which
has been revised down to 763,000 sqm in
our current forecasts.
Vacancy Rates – At 8.0%, the vacancy
rate remains within equilibrium for the
national office market. Over the next 12
months, vacancy is predicted to rise and
reach a cyclical peak between 9.0% and
9.5%. Tenants are starting to upgrade from
secondary to prime space and similar to
previous cycles, vacancy will be displaced
to poorer quality secondary-grade assets.
Effective Rents – Prime gross effective
rents appear to have reached the trough
in the financial centres (Sydney and
Melbourne) while the rate of decline is
starting to slow in the resource-dominated
markets (Brisbane and Perth). There is
a strong positive correlation between
vacancy and incentives in Australian
office markets. The following chart shows
quarterly observations over the past 25
years. The current levels of incentives in
the Sydney CBD office market are outliers
on the time series. Essentially, landlords
offered a higher level of incentive in 2009
to maintain occupancy rates and cash flow
over what was expected to be a protracted
downturn. As the market stabilises,
leasing incentives will ease to a level more
Sales campaigns in late-2009 showed larger A-REITs that are now focused on
attuned to market fundamentals in Sydney
the first signs of the large A-REITs growing portfolios to boost dividends to
(and Melbourne), resulting in positive
and Wholesale trusts re-entering the shareholders. Nevertheless, the extent of
effective rental growth from late-2010
investment market to compete for rarely the debt refinancing task over the next few
onwards. The correction in Brisbane
traded prime assets. Most analysts years ensures that smaller A-REITs will
and Perth effective rents is expected to
estimate that the A-REITs have raised continue to be active vendors and look to
continue for a further 12 months, before
excess capital relative to optimal gearing dispose of non-core assets.
stabilising in 2011(Figure 9).
and acquisitions will be a key strategy for
Buyer Profile
The relative strength of the Australian Figure 9: Sydney CBD Vacancy Rate and Incentives
economy has not gone unnoticed by Incentives (Months Rent Free on a 10-Year Lease)
domestic and overseas property investors 60
and it is evident that distressed quality 50
prime assets will not appear on the 40
market. Furthermore, risk premiums 2009
30
for prime assets are above historical
20
benchmarks and the prospect of rising
10 2012 F
income in the medium term will attract a
greater depth to the buyer pool than the 0
0% 5% 10% 15% 20% 25%
last two years. Vacancy Rate

Source: Jones Lang LaSalle

16 Jones Lang LaSalle | Office Investment Market Review


The Australian investment market
continues to appear attractive for a
number of global property investors, with
the combination of a highly developed
and transparent real estate market and
solid fundamentals in comparison with
a number of mature markets in North
America and Europe. There are, however,
hurdles to entry. On a trade weighted
basis, the AUD rose 25.8% between
2008 and November 2009, and by 32.4%
against the USD. The appreciation of the
AUD may represent a hurdle for overseas
investors looking to gain exposure to the
Australian real estate markets.
The prospect of strong capital value
over the medium term will see overseas
institutions with global mandates target
Australia, but as other mature market
encourage them to consider assets that at
the time of purchase offer some risk such
as vacancy, competition and lease expiry.
Even with a higher risk, these assets offer
the opportunity for innovative strategies to
maximise both capital and income returns.
A compelling case for the refurbishment
of secondary assets is emerging. Benefits
include tenant retention, increased income
and lower vacancy. The market is more
discerning regarding covenant, lease
term and the physical attributes of an
asset and refurbishment can amortise
the yield spread and owners can achieve
a significant return on investment
through a minor or staged refurbishment.
Consequently, property companies
approach a trough in the value cycle and and private investors will start to target
start to offer stronger upside potential, asset with refurbishment potential as the
Australia may see a reduction in the level year progresses.
of counter cyclical overseas investors.
As a result of growing institutional and
overseas interest, the total and average
value of transactions is predicted to
increase over the next 12 months. We
expect to see more transactions in excess
of AUD 100 million relative to 2008 and
2009, although it is unlikely it will be to the
level recorded between 2003 and 2007.
Private investors will continue to seek
out counter cyclical opportunities. As
the demand outlook continues to firm
and most markets have a moderate
development pipeline, the growing
competition amongst private investors will
Jones Lang LaSalle | Office Investment Market Review 17
Major Transactions Throughout 2009
25 Grenfell Street
Location: Adelaide Rate: AUD 3,011 per sqm
Sale Date: April 2009 Initial Yield (passing income): 9.67%
Sale Price: AUD 76 million Vendor: AMP Life Ltd
NLA: 25,244 sqm Purchaser: GDI Property Group

A landmark office tower, 25 Grenfell Street is a 23-storey building positioned at the centre of the Adelaide CBD.
This makes the property easily accessible through all forms of public and private transport, and is highly visible from
the flight path. The AUD 76-million building has a total NLA of 25,244 sqm and sale rate of AUD 3,011 per sqm. It
comprises basement car parking, a plaza, modern foyer, retail accommodation on the ground level and quality office
accommodation from the 1st to the 23rd levels.

300 Queen Street

Location: Brisbane Rate: AUD 5,721 per sqm
Sale Date: June 2009 Initial Yield (fully leased): 8.24%
Sale Price: AUD 109.65 million Vendor: Colonial Office Fund
NLA: 19,167 sqm Purchaser: S.KW Pty Ltd

Commonly known as the HSBC Centre, 300 Queen Street is a 24-storey commercial office building that is
prominently situated at the heart of the Brisbane CBD. The AUD 109.65-million building has a total NLA of 19,167
sqm and a price rate of AUD 5,721 per sqm. It comprises 18,213 sqm of Grade A office accommodation and 954
sqm of prime retail space adjacent to the Post Office Square.

33 Breakfast Crek Road

Location: Newstead, Queensland Rate: AUD 5,598 per sqm
Sale Date: July 2009 Initial Yield (fully leased): 7.73%
Sale Price: AUD 173 million Vendor: FKP Commercial Developments Pty Ltd
NLA: 30,904 sqm Purchaser: Cromwell River Park Trust

Energex @ Gasworks is a landmark commercial and retail building. This development is currently under
construction within the AUD 1-billion master-planned Newstead Riverpark mixed-use development. Targeting a six-
star Green Star rating, the development will comprise basement car parking on two levels, retail accommodation on
the ground level and office space on the upper six levels. Upon completion, the building will provide 28,614 sqm of
commercial accommodation and 2,290 sqm of retail space. The purpose-built complex will accommodate Energex,
which has fully leased the commercial component of the building as well as 252 car bays for an initial term of 15
years.

Australian Tax Office Headquarters

Location: Genge Street, Canberra Rate: AUD 4,803 per sqm
Sale Date: July 2009 Initial Yield (fully leased): 7.43%
Sale Price: AUD 205 million Vendor: QIC
NLA: 42,680 sqm Purchaser: Real IS

Commonly known as the Australian Tax Office Headquarters, the ten-storey office building is situated along Genge
Street in Canberra. The property, which was completed in 2008, is part of the AUD 500-million redevelopment
of Section 84 by Queensland Investment Corporation (QIC). It has a total NLA of 42,680 sqm and a sale rate of
AUD 4,803 per sqm. The building includes two storeys of basement car parking, which has about 400 parking
bays. Achieving a 4.5 NABERS rating, the property comprises 1,584 sqm of retail space and 41,096 sqm of office
accommodation

15 William Street
Location: Melbourne Rate: AUD 4,089 per sqm
Sale Date: June 2009 Initial Yield (passing income): 8.85%
Sale Price: AUD 167 million Vendor: AMP Capital Investors
NLA: 40,844 sqm Purchaser: Deka Immobilien

Known as 15W, 15 William Street is a 20-storey office building that is located at the heart of Melbourne’s high-
profile financial district. It enjoys extensive frontage to William and Flinders streets, and Flinders and Custom
House Lanes. The building, which was constructed in 1967 and completely refurbished and upgraded in 2006,
currently provides Grade A office accommodation and incorporates parts of the ground floor for retail use and
parking space. It has a total NLA of 40,844 sqm and a sale rate of AUD 4,089 per sqm.

18 Jones Lang LaSalle | Office Investment Market Review

120 Harbour Esplanade
Location: Docklands, Melbourne Rate: AUD 4,116 per sqm
Sale Date: April 2009 Initial Yield (passing income): 8.60%
Sale Price: AUD 340.10 million Vendor: APN
NLA: 8,019 sqm Purchaser: Private Investor

A signature Grade A office building, 120 Harbour Esplanade is located within Melbourne Docklands – Australia’s
premier commercial growth centre. The eight-storey property, which features a modern design and was completed
in 2005, enjoys outstanding waterfront views and is securely leased to a high-profile blue chip tenant. The building,
which has a total NLA of 8,019 sqm and a price rate of AUD 4,116 per sqm, provides 50 parking slots on the
basement level.

45 Francis Street
Location: Northbridge, Perth Rate: AUD 4,316 per sqm
Sale Date: March 2009 Initial Yield (fully leased): 9.78%
Sale Price: AUD 95 million Vendor: Macquarie
NLA: 22,013 sqm Purchaser: Deka Immobilien

Accredited with a five-star NABERS energy rating, 45 Francis Street provides one of the largest floor plates in
Perth. Constructed in 1992, the property offers a high level of income security with a lease to the Australian Taxation
Office expiring in 2017. The property, which has a total NLA of 22,013 sqm and a sale rate of AUD 4,316 per sqm,
comprises five levels of Grade A office space, a basement car parking and eight retail tenancies on the ground floor.

81 St Georges Terrace
Location: Perth Rate: AUD 3,190 per sqm
Sale Date: March 2009 Initial Yield (fully leased): 6.37%
Sale Price: AUD 38 million Vendor: Macquarie
NLA: 11,911 sqm Purchaser: Private Investor

Enjoying high exposure to pedestrian traffic, 81 St Georges Terrace is located on the southern side of St Georges
Terrace intersecting Howard Street. The property, which has a total NLA of 11,911 sqm and a sale rate of AUD
3,190 per sqm, comprises office space on the upper 11 levels, a retail space on the ground level and a basement
parking on the lower ground level.

343 George Street

Location: Sydney Rate: AUD 5,325 per sqm
Sale Date: July 2009 Initial Yield (fully leased): 8.59%
Sale Price: AUD 55 million Vendor: Dexus Property Group
NLA: 10,328 sqm Purchaser: Abacus Property Group

Heritage-listed 343 George Street is a ten-storey commercial office building situated on the south-west portion of
the CBD core precinct, which enjoys direct frontage to George and Barracks Streets. The 1,169 sqm site, which
was completed in 1925 and refurbished in 2006, has a total NLA of 10,328 sqm and a sale rate of AUD 5,325 per
sqm. It comprises 834 sqm of retail space on the ground level and 8,450 sqm of office space, with the remaining
area comprising lower ground and basement accommodation.

60 Union Street
Location: Pyrmont, Sydney Rate: AUD 6,923 per sqm
Sale Date: November 2009 Initial Yield (fully leased): 7.33%
Sale Price: AUD 137 million Vendor: Charter Hall Group
NLA: 19,790 sqm Purchaser: AFIAA Foundation for International Real Estate

Completed in 2006, ‘Atrium’ or 60 Union Street is located in Pyrmont, Sydney. The property comprises an eight-
storey commercial building, a four-storey terrace building and a retail space on the ground floor and lower ground
floors. The eight-storey tower is allocated for office space, while the four-storey terrace building that fronts Union
Street comprises retail space on the lower ground floor and office space on three floors. The building, which was
accredited with a four-star NABERS rating, has a total NLA of 19,710 sqm and a sale rate of AUD 6,923 per sqm. It
comprises two levels of basement parking with 182 parking slots.

Jones Lang LaSalle | Office Investment Market Review 19

2009 Major Transactions (greater than AUD 15 million)
All Office Transactions – 2009
Property Name Address Suburb Month Sale Price Initial Yield NLA (sqm) Rate ($ per sqm) Vendor Purchaser
New South Wales
61-79 Quay Street Haymarket Feb $38,000,000 N/A Site N/A NGI Investments Metroland Australia Limited
379-381 George Street Sydney Feb $24,000,000 N/A Site N/A Derisi Pty Ltd Terra Australis Property Fund
1 Bligh Street Sydney Feb $210,000,000 N/A Site N/A Dexus Property Group Cbus Property
50 Margaret Street Sydney May $40,500,000 10.20% 8,722 $4,643 Challenger Hybrid Fund Phillip Wolanski
Kindersley House 33 Bligh Street Sydney Jul $75,000,000 N/A 18,241 $4,752 Investa Funds Management Ltd Energy Australia
343 George Street Sydney Jul $55,000,000 8.25% 9,932 $5,538 Dexus Property Group Abacus Property Group
Macquarie Place 45 Macquarie Street Parramatta Jul $15,000,000 N/A Site N/A Becton Property Group Crown International Holdings Group
54 Park Street Sydney Aug $50,000,000 10.00% 15,950 $3,135 PBL Property Pty Ltd AMP Capital Investors Limited
505-523 George Street Sydney Oct $85,000,000 9.52% 16,554 $5,135 Challenger Coombes Property Group
The Atrium 60 Union Street Pyrmont Nov $137,000,000 7.33% 16,800 $6,919 Charter Hall Core Plus Office Fund AFIAA Foundation for International Investments
AMP Building 20 Hunter Street Sydney Nov $77,000,000 7.90% 9,942 $7,745 Grosvenor Group CLSA
25 Smith Street Parramatta Nov $48,400,000 7.54% 11,058 $4,377 Grosvenor Group Private Investor
234 Sussex Street Sydney Nov $46,000,000 8.30% 10,020 $4,591 Stockland Property Group Clipper Property Group
93 George Street Parramatta Dec $18,500,000 10.48% 7,217 $2,896 Becton Office Property Fund No. 2 Quintessential Constructions
Victoria
457-471 Bourke Street Melbourne Jan $34,000,000 9.19% 15,132 $2,247 Macquarie Direct Property Fund Manhattan Investments
Chandler McLeod 473-481 Bourke Street Melbourne Feb $42,000,000 5.38% 9,290 $4,521 473 Bourke Street Pty Ltd Royal Automotive Club of Victoria
1 Spring Street* Melbourne Apr $65,200,000 7.73% 31,776 $4,115 Australian Prime Property Fund Henroth Group
IOOF Centre 303 Collins Street Melbourne Apr $56,000,000 10.17% 20, 591 $2,720 Macquarie Direct Property Fund Phileo Australia Limited
Victoria Point Docklands - Stage 1 120 Harbour Esplanade Melbourne May $33,010,000 8.60% 8,019 $4,116 APN Direct Property Fund Private Investor
15W 15 William Street Melbourne Jun $166,500,000 8.73% 40,400 $4,121 AMP Australian Core Property Portfolio Deka Immobilien Investment
Victoria Police 412 St Kilda Road Melbourne Jun $42,000,000 9.57% 16,285 $2,579 ING Office Fund Private Syndicate
369 Royal Parade Parkville Jun $19,930,000 11.80% 8,676 $2,297 Investa Property Group Riverlea
Aviva House 509-511 St Kilda Road Melbourne Jul $55,000,000 9.72% 19,687 $2,794 Dexus Wholesale Property Fund Calibre Capital
215 Spring Street 209-227 Spring Street Melbourne Aug $59,000,000 8.50% 15,500 $3,806 Colonial First State (Private Investor Fund 1) Knowles Group
Australian Tax Office 990 Whitehorse Road Box Hill Aug $43,800,000 11.47% 26,650 $2,121 ING Office Fund Glorious Sun
C100 100-106 Leicester Street Carlton Aug $29,800,000 N/A 7,000 $4,157 Blue Earth Developments Pty Ltd Melbourne University
456 Lonsdale Street Melbourne Aug $27,000,000 7.93% 8,226 $3,282 Maquarie Direct Property Fund Undisclosed
344-350 Collins Street Melbourne Sep $52,250,000 9.80% 17,800 $2,935 Orchard Commercial Office Fund Private Investor
Doncaster Corporate Park Stage 1 605 Doncaster Road Doncaster Sep $17,300,000 N/A N/A N/A Mirvac Real Estate Investment Trust Undisclosed
Customs House 414 La Trobe Street Melbourne Oct $49,500,000 9.36% 14,415 $3,434 New Star Asset Management Juilliard Group
883 Whitehorse Road Box Hill Oct $24,300,000 8.17% 7,237 $3,358 Blackrock Undisclosed
128 Exhibition Street Melbourne Oct $15,000,000 8.48% 4,778 $3,139 AMP Capital Investors Salvest Capital
606 St Kilda Road Melbourne Nov $23,750,000 10.01% 8,659 $2,731 Becton Office Property Fund Private Investor
446 Collins Street Melbourne Nov $18,300,000 7.80% 5,350 $3,421 Becton Investment Management H & TSC Pty. Ltd.
Owen Dixon Chambers West 525-539 Lonsdale Street Melbourne Dec $54,000,000 N/A 19,000 $2,842 Private Investors Barristers Chambers Limited
* 50% Stake
All Office Transactions – 2009
Property Name Address Suburb Month Sale Price Initial Yield NLA (sqm) Rate ($ per sqm) Vendor Purchaser
Queensland
321 Montague Road West End Feb $20,120,000 N/A N/A Site Energex Mirae Asset
ICB Central 15 Butterfield Street Herston Mar $67,500,000 7.70% 11,254 $5,998 Mirvac Domaine SEQ Growth Fund Bergh Pty Ltd
380 Queen Street Brisbane Apr $19,000,000 7.18% 4,359 $4,359 Aria Securities Pty Ltd Mineralogy Pty Ltd
159 Coronation Drive & 5 Cribb Street Milton May $21,060,000 8.78% 5,371 $3,921 Becton Diversified Direct Property Fund Private Investor
HSBC Building 300 Queen Street Brisbane Jun $109,650,000 8.14% 19,167 $5,721 Commonwealth Property Office Fund S.KW Pty Ltd
Energex Building 33 Breakfast Creek Road Newstead Jul $173,000,000 7.73% 30,904 $5,598 FKP Property Group Cromwell Riverpark Trust
157-163 Ann Street Brisbane Aug $21,500,000 9.84%* 6,679 $3,219 Macquarie Direct Property Fund City of Brisbane Investment Corporation
164 Grey Street South Brisbane Aug $15,000,000 9.17% 3,079 $4,872 Mirvac Funds Ltd Renweed
410-414 Queen Street Brisbane Sep $23,800,000 10.96% 5,878 $4,049 Trinity Enhanced Return Fund Undisclosed
National Bank Central 180 Queen Street Brisbane Sep $22,000,000 N/A 3,652 $6,024 Mirvac PFA Diversified Property Fund Private Investor
400 Queen Street Brisbane Oct $15,750,000 6.53% 3,989 $3,948 Trinity Enhanced Return Fund Private Investor
State Service House 96 Albert Street Brisbane Oct $15,250,000 5.22%* 3,341 $4,565 Devine Ltd Undisclosed
King George Central 145 Ann Street Brisbane Nov $208,100,000 8.00% 27,820 $7,534 Leighton Properties Pty Ltd Commonwealth Property Office Fund
Centenary Square 108 Wickham Street Fortitude Valley Nov $63,500,000 8.89% 11,885 $5,343 Fortius Fund Management Pty Ltd Primewest
Western Australia
St Georges Centre 81 St Georges Terrace Perth Mar $38,000,000 6.33% 11,910 $3,191 Macquarie Bank Nick Tana
ATO 45 Francis Street Northbridge Apr $95,000,000 9.80% 22,013 $4,316 Macquarie Bank Deka Immobilien Investment
Phillips House 53 Ord Street West Perth Jun $41,500,000 7.74% 6,864 $6,046 Commonwealth Property Office Fund Primewest Management
1100 Hay Street West Perth Jun $38,000,000 9.34% 7,244 $5,246 Macquarie Bank (Macquarie Office Trust) Private
State One House 172-176 St Georges Terrace Perth Jun $35,000,000 10.41% 6,265 $5,586 GE Real Estate Investments Undisclosed
Alluvion 54-58 Mounts Bay Road Perth Nov $95,000,000 7.59% 22,395 $8,484 Charter Hall Opportunity Fund (No. 4) Commonwealth Property Office Fund
South Australia
Australian Taxation Office 81-97 Waymouth Street Adelaide Jan $51,000,000 9.16% 17,878 $2,853 Trust Company of Australia Ltd KTS Properties Pty Ltd
Chesser House 91-97 Grenfell Street Adelaide Jan $34,500,000 8.90% 11,483 $3,004 Stocklands Chesser Properties Pty Ltd
Naylor House 191 Pulteney Street Adelaide Feb $49,000,000 9.22% 16,000 $3,062 Macquarie Office Trust Perpetual Trustee Co Ltd
Grenfell Centre 25 Grenfell Street Adelaide Apr $76,000,000 9.49% 25,244 $3,011 AMP Life Ltd GDI Property Group
115 Grenfell Street Adelaide Aug $41,000,000 9.90% 13,238 $2,949 Investa Diversified Office Fund Grenfell 115 Pty Ltd
80 King William Street 70-80 King William Street Adelaide Oct $21,750,000 9.69% 8,105 $2,684 Trinity Funds Management Limited Peter Tunno
Conservatory on Hindmarsh 131-139 Grenfell Street Adelaide Nov $16,400,000 8.1% 4,050 $4,049 Grenfell East Century Funds Management
* Equivalent Yield
All Office Transactions – 2009
Property Name Address Suburb Month Sale Price Initial Yield NLA (sqm) Rate ($ per sqm) Vendor Purchaser
ACT
38 Akuna Street City Jan $22,000,000 N/A 12,522 $1,757 MacarthurCook Office Property Trust Amalgamated Property Group
62 Northbourne Avenue City Feb $38,000,000 8.51% 10,218 $3,719 Investa Property Group Credit Suisse Real Estate Fund International
Industry House 10 Binara Street City May $123,000,000 7.73% 28,250 $4,918 AMP Capital Wholesale Office Fund Andrew Roberts
ATO Stage 2 Genge Street City Jul $205,000,000 7.10% 48,045 $4,163 QIC Real I.S.
64 Allara Street City Jul $18,500,000 8.00% 3,154 $5,866 Orchard Funds Management Australian Ethical Investment
Northbourne Avenue Offices 82 Northbourne Avenue Braddon Nov $44,000,000 6.95% 6,799 $6,472 Melvip Undisclosed (Private Investor, Australia)
Perpetual Trustee 10 Rudd Street City Nov $18,700,000 9.52% 4,739 $3,946 Mirvac Real Estate Investment Trust Strada Pty Ltd
* Equivalent Yield
Authors

John Talbot
Head of Capital Markets, Australia
+61 2 9220 8486
john.talbot@ap.jll.com

John Talbot is the Australian Head of Capital Markets at Jones Lang LaSalle. John is a 25-year veteran of
the commercial property industry in Australia with a background in institutional valuations, consulting, agency
and in more recent years major investment sales.

As the leader of the his firm’s Capital Markets business, John has been involved in some of the largest
investment transactions in Australia over many years including Chifley Tower and Aurora Place in Sydney,
the Melbourne Central complex in Melbourne, Central Plaza in Brisbane and Central Park
in Perth.

Andrew Ballantyne
Associate Director, Research
+61 3 9672 6554
andrew.ballantyne@ap.jll.com

Andrew joined Jones Lang LaSalle in July 2007 and is an Associate Director within the national research
division. He is responsible for managing the provision of strategic research services to all of Jones Lang
LaSalle’s Victorian business lines and for conducting primary research on the national office markets.
Andrew also undertakes consultancy assignments across the property sectors for overseas and domestic
clients and is a key resource for the Jones Lang LaSalle: Real Estate Intelligence Service.

Andrew is an experienced industry researcher with over nine years experience in the property and transport
and logistics industries. Andrew holds a Bachelors degree in Business Economics (with honours) and a
Master of Applied Research.
 www.joneslanglasalle.com.au

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