$30m Castlereagh St refurbishment - proof of CBD property renewal trend
Built Holdings Pty Ltd today announced it has secured the $34million contract for a major refurbishment of 149 Castlereagh St in Sydney's CBD, on behalf of Bamburgh Properties Pty Ltd.
The project will transform the current 9 level office building, built in 1938, into a 13 level building with 10,000m2 of A-grade office space and 2,000m2 of retail space meeting current market demands, and will involve relocating the core of the building as well as adding 4 new floors.
This project, and Built's $50million transformation project at 77 King Street, Sydney are further evidence that Sydney CBD commercial property investors and owners are increasingly prepared to make deep investments to materially upgrade properties at this point in the cycle.
Built Holdings Pty Ltd Managing Director, Mr Marco Rossi cited several other Built projects, including 77 King St, 250 Pitt St, 115 Pitt St, 225 Pitt St, and now 149 Castlereagh St, as indications of the commercial trend currently underway in the heart of the Sydney CBD.
"The commercial property market is tight at the moment and continues to pickup, and we've seen a range of clients taking a very positive approach to acquiring 2nd & 3rd grade buildings with the intension of major repositioning," said Mr Rossi. "In repositioning, these owners are seeking high quality design, construction, the application of ESD principles to deliver minimum 4 star green star space and the like to meet the needs of high value tenancies. Properties built 20-30 years ago need considerable refurbishment if they are to appeal to businesses today."
"There is of course, a very good reason for this trend," explained Mr Rossi, "with low Sydney CBD vacancy rates forecast to extend until at least 2009/2010 with rents on the rise, owners can see immediate returns from upgrading their properties."
The depth of opportunity for investors is reflected by the King St example, where the same amount is being spent on the refurbishment ($50million approx.) as was spent on purchasing the property in 2005 ($50million). This will be an iconic building in Sydney with the news that the Apple flagship concept store has secured the retail space on the ground, first and second floors.
Mr Rossi said investment in office refurbishment was coming from both private investors, and increasingly institutional investors such as superannuation funds, were behind the trend to substantially revitalise Sydney CBD office and retail space. He said a common factor in these investment decisions was Built's ability to complete high quality refurbishments, delivered in much shorter timeframes than would be achieved in a demolition/rebuild scenario - in order for the owner to attract blue chip long term tenants before significant levels of other competing new office supply come on-stream.
Mr Marco Rossi said this meant that major refurbishment projects had to be driven to plan, with Built focused on working with the client collaboratively in the early stages of the project to de-risk and value add upfront, Built facilitates a successful fast track delivery.
He concluded "Our early involvement with our clients on these complex and risky projects in collaborative procurement methods up-front ensures we minimise risks and fast-track these projects to get them to market earlier, maximising the ROI - something we are acutely conscious of."