Sydney’s prime towers are in demand even as the rest of the market comes under pressure.
The race for the country’s prime towers is heating up with Singaporean giant OUE REIT poised to exercise its rights to buy a half interest in Sydney’s Salesforce Tower in a deal valuing the skyscraper at about $1.73bn.
The move will see the Singaporean company splash out about $864m to take Chinese company Ping An Real Estate out of the city’s tallest offices, with the deal to show a capitalisation rate of about 5.75 per cent.
The crisp rate – a measure of property value – will provide a shot of confidence to the market that has been rattled by rising bond yields and concerns over a flood of stock at the lower end of the market weighing on values.
While some large campaigns have paused as owners recalibrate their expectations, other owners remain keen to sell off buildings with Dexus and Canada’s Brookfield also bringing high-quality offices to market.
OUE REIT’s move came after local office fund manager Investa made an early play for a 50 per cent stake in the striking Salesforce building that towers over Circular Quay.
As one of the building’s co-owners, OUE REIT is well positioned after it picked up an initial 19.9 per cent interest in the building for $357.2m in early 2026, giving it pre-emptive rights over interests in the block.
Other owners are Lendlease’s Australian Prime Property Fund Commercial, and Japanese investment group MEC Global Partners Asia. But the Lendlease fund is facing the prospect of hefty redemptions being lodged next month and MEC Global is selling other local office assets.
OUE REIT declined to comment on “market speculation”. “In line with its strategy to deliver sustainable, long-term value to unitholders, OUE REIT continually evaluates potential acquisition opportunities that meet its investment objectives,” it said.
Agencies JLL and Colliers are advising Ping An on the disposal.
The soaring 180 George St tower is the centrepiece of Sydney Place at Circular Quay. The precinct has benefited from more than $10bn in private investment, including the Sydney Waldorf Astoria Hotel developed by the billionaire Forrest family.
Salesforce Tower comprises 53 office floors spanning 59,916sq m, a ground floor lobby and retail plaza, and three levels of basement parking. Aside from the namesake anchor tenant, it also houses JLL and The Executive Centre, with the capitalisation rate in keeping with the rate paid earlier this year.
Top landlords are tipping the best office buildings will be winners in the race for tenants and investors while the pain will fall in areas like Sydney’s north shore, where values are falling and smaller buildings are struggling to find buyers.
Another split is emerging in the market as stock viewed as overpriced is left to linger on the market, while potential buyers point to resurgent geopolitical volatility and the difficulty of raising equity to syndicate assets.
Despite these issues, Dexus is set to join the swelling ranks of vendors of large office assets in Sydney. The listed group and Canada’s CPP Investment Board are preparing to put 60 Castlereagh St tower on the block for about $600m, via CBRE and Savills.
The 20-storey A-grade commercial office and retail building in the Sydney CBD is anchored by BNP Paribas and is in a prime precinct in the financial core.
At the same time, another Canadian heavyweight, Brookfield, has launched a move to sell a 50 per cent interest in 52 Goulburn St, with the stake to reap $180m.
Cushman & Wakefield and JLL are handling the sale of the building that Brookfield developed in 2007 and has since revamped. The 21,822sq m complex houses state and federal government tenants, providing valuable defensive income in volatile times.
Other large offers in Sydney include German group Commerz Real selling the Australian Federal Police headquarters, and Merchant House, also in the Sydney CBD, being offered by a consortium including Phoenix Property Investors.