Atlassian is set to partner up with Dexus for the delivery of its $1 billion office project in Sydney with Dexus also taking a 50% per cent stake.
The 40 storeys tower is to be developed on the former State Rail Inwards Parcels Shed – now being used as a Youth Hostel for backpackers' accommodation – on land owned by state government agency Transport for NSW. The concrete and timber tower is estimated to have 70,000 square metres of space, 60,000 of which will be occupied by offices with Atlassian taking just six floors, with the rest being leased to other tenants. Atlassian has chosen Built to construct the tower, after a three-way competition with Multiplex and Lendlease.
The tie up with Dexus will extend the Groups overall control the precinct with Dexus and Frasers already proceeding with the adjoining development of a twin-tower project worth about $2.2 billion, named Central Place Sydney.
Sources suggest that Dexus is expected to pay $500-plus million for the 50% interest in the building, in exchange for delivering the project, reflecting a cap rate of 4.2% to 4.5%.
The three towers will combine to add 210,000sqm of office space to Sydney from 2022, however prior to then a further 117,161sqm of new stock is due to enter the market in the second half of 2020 and another 114,000sqm in 2021. The significant supply comes at a time when office demand may be shrinking. According to the Property Council of Australia, the Premium and A Grade market in Sydney in the 12 months to July 2020, has only absorbed 30,000sqm of net office space, despite vacancy remaining very tight. The COVID pandemic is set to test this further as businesses adjust to the new normal.
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