Invesco in with $400m for Elizabeth Quay Tower

29 January 2020

Invesco Real Estate have finalised agreements to acquire a 50% interest in Brookfield's latest office tower at Elizabeth Quay, Perth.


The deal worth $400m, was based on a 5% yield and is expected to reach financial close in February.


The 57,000sqm office building is being developed to house Chevron's new HQ. Chevron will occupy 42,000sqm on a 15 year lease, leaving 15,000sqm of space to fill in a market already saturated by vacant space.


Multiplex have been appointed to construct the project which was initially conceived by Chevron who actually acquired the site directly in 2013 for $64m, before selling it to Brookfield in May 2019. Construction will start in mid-2020 with completion expected in mid-2023.


The building will also house a childcare and gymnasium along with retail tenancies, cafés and restaurants, exhibition spaces and conference facilities. The building has been designed to achieve leading sustainability ratings including 5 Star NABERS and Green Star ratings.


According to JLL, the Perth CBD recorded a positive net absorption of 7,700 sqm in 3Q19 and 39,800 sqm over the 12 months to September 2019. Vacancy remains elevated (19.4%), but the spread between prime (14.4%) and secondary (27.2%) remains wide reflecting stronger occupier demand for prime grade assets. Activity from existing CBD tenants is likely to remain, driven by lease expiry and the opportunity to upgrade office space. Unfortunately, Secondary vacancy is expected to remain elevated as a result of occupier upgrades.


JLL also noted that the long-term spread between Perth and Sydney CBD average prime yields is 145 basis points (bps) but that the additional vacancy in the market has pushed the spread to 206 bps.


Few details on the Invesco position have been released, however it is likely to include significant cushions for the leasing risk that is likely to remain in the market in 2023.