DWS takes a loss as Clarence Property buys Brisbane CBD office tower for $119m

Clarence Property has expanded its office assets through the acquisition of 120 Edward Street from German investment group DWS for $119 million – a deal which has been struck at a steep discount to the property’s previous 2017 purchase price.

The Gold Coast-based Clarence Property has acquired the A-grade office building via its flagship Clarence Property Diversified Fund, adding to an existing Brisbane office asset at 201 Leichardt Street and the Rocket building at Robina on the Gold Coast.

The acquisition comes on the heels of market rumours late last year that Queensland-based investment group Ashe Morgan was eyeing the property for about $120 million.

The sale to Clarence Property by DWS, which was formerly known as Deutsche Asset Management, represents a loss for the German investor which had paid $142.7 million for the office tower seven years ago.

However, Clarence Property see the acquisition as a counter-cyclical play which is supported by the building’s 98 per cent occupancy rate.

Clarence Property’s head of capital transactions, Ben Somerville, says the group is “cautiously optimistic” about the year ahead despite economic headwinds buffeting the sector.

“We have certainly seen a softening of yields in the office market nationally, but the Brisbane CBD transaction provides a strategic holding in a market that continues to show remarkable strength,” he says.

The office deal comes on the heels of a solid office vacancy performance by the Brisbane office market over the past six months.

Property Council of Australia data released today shows the office vacancy rate for Brisbane’s CBD dropped to 9.5 per cent in July, its lowest level since 2013.

The figure is down from 11.7 per cent in January this year and compares with an overall office vacancy rate across Australia of 14.8 per cent – down from 14.6 per cent.

CBRE Queensland senior managing director Bruce Baker says the Brisbane office market has been supported by rising leasing activity in the Asia Pacific, including “significant interest” in the Edward Street building.

The 120 Edward Street property has 15,161sqm of net lettable area over 18 levels. It was developed in 2001 and has undergone an extensive refurbishment program by DWS.

“This acquisition represents a strategic counter-cyclical play in a market that we believe is well placed for the future,” says Simon Kennedy, the Clarence Property CEO.

“The property has been acquired at well below replacement cost and the resilience we have seen in Brisbane in recent years positions it as one of the standout office markets nationally.”

Clarence Property was founded 30 years ago in northern NSW by property agent Peter Fahey with the investment fund seeded by a number of retail assets located in Grafton.

The company’s flagship fund, which includes retail, commercial, medical, industrial and childcare assets in Queensland and NSW, has grown to more than $800 million in assets under management following the latest acquisition.