Dexus heads to new Sydney digs as Westpac, CBA scour Melbourne
Westpac and Commonwealth banks have issued major leasing mandates for new office digs in Melbourne at a time when tenants are in a good position to bargain better deals with landlords.
In Sydney, Dexus is moving to the upmarket $2 billion Quay Quarter Tower (QQT) at Circular Quay as a result of its takeover of AMP Capital’s real estate and domestic infrastructure equity business, in a phased process out of Australia Square in George Street.
A Dexus spokesperson said plans to co-locate the Dexus and AMP Capital teams into 6700 square metres over four floors at the newly developed opened QQT were well advanced. Dexus will manage the property and will look to find new customers for its leases at Australia Square.
The QQT, which won the Urban Taskforce Australia’s development of the year award, is an 89,000 square metre commercial tower and has been the catalyst for revitalisation of the harbour front at Circular Quay. The development is jointly owned by AMP Capital Wholesale Office Fund, Dexus Wholesale Property Fund and Rest Super.
In Melbourne, Westpac is looking for between 9000 square metres and 12,000 square metres of office space within the Melbourne CBD, including Docklands. The bank wants to move from the current 150 Collins Street digs by the start of 2026.
In its brief, the bank wants large floor spaces, flexi space and signage of a building constructed with sustainably sourced materials, has managed waste in the base of the building and “carbon-neutral building operations”.
Its competitor CBA’s mandate covers 15,000 square metres as it looks to move of its Collins Square building. Leasing agents said properties owned by Cbus and Dexus’s 60 Collins Street could be potential options.
The leasing musical chairs reflect the flight to quality trend which prompts businesses to value the workplace as a lever to attract and retain staff.
Dexus chief executive Darren Steinberg said in August that businesses where staff were in the office most of the week were performing better, with higher productivity, increased collaboration and improved staff morale.
“It’s becoming very evident now, from when we look within our business, successful businesses are getting people back to the office at least three days a week, if not more,” Steinberg said.
In his recent office market report, Investa’s head of research David Cannington said a clear “flight to quality” theme had been reflected in both occupancy and leasing market outperformance of higher quality office space.
The report shows that 95 per cent of Australian CBD leasing activity in the first half of 2022 has flowed to the prime office market.
“A post-lockdown release of pent-up leasing demand has almost exclusively landed in the prime office market,” Cannington says in his report.
Investa’s analysis indicates that while positive prime office market leasing demand is already driving some catch-up in rental growth, high inflation is expected to drive further upward momentum in rents and other office leasing costs in the coming year.
Cannington added that looking through the occupancy challenge of the transition to a hybrid work environment, leasing market conditions for Australia’s major capital city office markets were expected to maintain a two-speed office market recovery.
