151 Pirie Street tower offering set to highlight investor demand for prime Adelaide office investment opportunities

Following a standout performance during the pandemic period, the investment appeal of Adelaide’s CBD office market is set to be reinforced with the offering of 151 Pirie Street. 

Strong domestic and offshore buyer interest is anticipated in the global Expressions of Interest campaign, which is being steered by CBRE’s Ian Thomas and Alistair Laycock . 

Mr Thomas noted that the Adelaide office market has been extremely resilient throughout the COVID-19 pandemic, being the only CBD market nationally to record positive net effective rental growth in 2021.  

The city’s tenancy base has also continued to grow at a time when other CBDs globally have been significantly impacted by lockdowns, tenant contraction and hybrid working. 

“Adelaide’s CBD office market offers investors a significant yield premium on many other markets across Australia and provides genuine value, given the limited impact that COVID-19 has had on the city coupled with a positive outlook for the state economy,” Mr Thomas said. 

“The vacancy rate for new generation office towers in the Adelaide core is around 1%, which is below pre-COVID levels and one of the lowest in Australia, while the overall prime city vacancy has dropped to a nine-year low of 10.6%.” 

“The stability of the CBD’s occupier base, solid leasing activity and Adelaide’s positive net effective rental growth is underpinning investor confidence. Growth in existing industries like health and medical research combined with emerging industries such as defence, innovation and cyber security are helping drive the state economy, which has also benefitted from the best net migration figures in three decades.” 

“Continued growth in the public sector workforce has provided an additional market boost, with overall lease enquiry levels being above pre-pandemic levels.” 

Situated in the core of the Adelaide CBD, offering views over Hindmarsh Square, the 12,434sqm, 151 Pirie Street tower has one of the strongest tenant retention track records in the Adelaide CBD, with only two occupiers having relocated since the building was developed in 2006. In both instances the vacancy was absorbed by sitting tenant expansions.  

Over the past two years, there has been significant tenant recommitment within the building including Aussie Home Loans and Super SA into their new ground floor tenancies, Super SA into level 2 and Design Inc into their new tenancy on level 5. 

Mr Laycock said the asset would appeal to investors looking for income with minimal risk underpinned by a high calibre tenancy mix, with 38% of the asset’s NLA leased to three government entities, including a new 10-year lease to the South Australian Government for over a quarter of the building. 

KPMG occupies the top three floors, with other significant tenants including health fund Bupa, Aussie Home Loans and building managers, CBRE.   

“The current owner’s leasing and capital expenditure strategies for 151 Pirie Street have positioned the asset perfectly to meet the future tenant demands of the post-pandemic workplace and ride through the current Adelaide development cycle,” Mr Laycock said. 

“Recent investments include approximately $7m of upgrades, comprising new end-of-trip facilities and multiple floor refurbishments, meaning minimal capital expenditure will be required over the next ten years. The building’s environmental credentials also position the building to capitalise on higher occupier and investor demand for energy efficient buildings, with the tower having a current 5.5 Star NABERS rating.” 

Expressions of Interest close April 6, 2022.