Alceon Qld, a financier and multi-strategy alternative investment manager, has acquired a prime Brisbane CBD commercial carpark and office building in the Brisbane legal precinct for $73 million.
The irreplaceable social-infrastructure asset at 40 Tank Street Brisbane is the latest acquisition in Brisbane as part of Alceon’s thematic strategy to acquire undervalued and counter cyclical commercial and social infrastructure assets, adding value through active management.
Alceon’s research indicates the Brisbane CBD is the only market nationally where the secondary market is tighter than prime.
Therefore, rental growth in the secondary market will underpin growth in the market as a whole and is likely to pressure tenants to upgrade.
This market characteristic is another factor that has generated strong comparative facing rental growth in Brisbane compared with its peers. Since January 2017, the Brisbane CBD has had proportionately the least amount of CBD office space added compared with Sydney and Melbourne, while enjoying the greatest positive net absorption.
The stable and long-term asset
During due diligence, new lease terms were secured with the Queensland Police Service (52.4 per cent of the income) until 2028, and CarePark (43.8 per cent of the income) until 2031, increasing the WALE to more than 5.5 years.
The building boasts strong ESG credentials with a 6-star NABERS energy rating, comprising five levels of office space with a net lettable area (NLA) of 5906 sq m and four levels of parking offering 327 bays, and 312 sq m of street level retail.
Todd Pepper, Founder and Executive Director at Alceon Qld, said: “We are very pleased with this acquisition. The supply outlook for the Brisbane CBD office market is relatively restrained with just three projects committed to 2028, and the availability of good quality, well located contiguous space, diminishing very quickly. This characteristic is promoting solid rental growth in existing assets and a further tightening of the CBD’s vacancy rate.
“The expectation is that stronger rental growth will also be driven by elevated construction costs that will continue to push up economic rents for new projects, with forecast average net effective rental growth of 4.1 per cent a year over the next 10 years.”
Brisbane facing tighter market for CBD office space
The Property Council of Australia’s vacancy rate for B-Grade assets is 9.9 per cent in Brisbane compared with the Sydney CBD average of 11.6 per cent and the Melbourne CBD average of 15 per cent.
Pepper said other features of this asset that attracted Alceon were its specialised location, carparking, social infrastructure function and redevelopment opportunity.
“The site has the most flexible Brisbane town planning uses with unrestricted building height (subject to aviation limitations), with the option of expanding the existing NLA by up to 50 per cent. There is also the potential for the unique 2,106m2 site to be development ready site two years before the 2032 Brisbane Olympic Games.
“Its location is ideal for Queensland Police, being within 100 metres of four law courts, having a direct pedestrian bridge from Tank Street to the Gallery of Modern Art and South Brisbane, as well as being only a five-minute walk to Roma Street.
“The carpark is a key social infrastructure asset, being one of only six major (250-bay +) public car parks in the Brisbane CBD and the only one in the legal precinct. Extremely restrictive town planning will make future public car parking of this scale difficult to build therefore limiting future CBD car parking supply.”
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