AOF to see Telstra Vacate Pirie Street tower

17 December 2021

The Australian Unity Office Fund will feel the impact of the relocation by Telstra from its 30 Pirie Street, Adelaide asset.

AOF has been advised by Telstra, the major tenant will not renew its lease, upon expiry in February 2023. Telstra has indicated a potential requirement to remain in the building for a short period following expiry of its lease.

Telstra had previously made it known that its Adelaide requirement would shrink from 22,000sqm to between 4,500sqm to 7,000sqm and AOF had hoped to retain part of the group on a new lease.

The A-grade office building is centrally located in Adelaide’s CBD, comprising 23 levels of office space with Telstra having occupied 21 levels.

AOF has a repositioning and refurbishment strategy that is currently being master planned to create an activated vibrant forecourt and ground floor lobby, introducing a concierge and creating connectivity to the open space adjoining the site.

Additionally, hub style meeting rooms with state-of-the-art third space amenity, end-of-trip facilities, together with base building and on-floor upgrades, are being designed to maximise tenants’ occupancy and wellness experience.

AOF had hoped that its repositioning strategy would assist to retain Telstra.

The Fund reported a valuation loss of $22m (-20%) on the asset as at June 2021 following a 125bps softening of the cap rate to 7.25% and due to the increase in capital expenditure refurbishment allowances required to back fill at least half of the Tesltra space. There is a risk now that the valuation may fall further.

Following an active leasing campaign, the top two levels have either been leased or are under signed heads of agreement.

Three of the current 21 levels are leased to Telstra are sub-let to various tenants and AOF are in direct discussions with these tenants regarding their future tenancy requirements.

With the certainty that Telstra will vacate the property during 2023, AOF will further refine its repositioning and re-leasing strategy.