Adelarch
August 10th, 2004, 12:53 AM
Adelaide soars
By Josephine Stott
Commercial Property Gazette
5 August 2004
From port to airport and throughout the heart of the CBD there is a quick_ening pulse running through Adelaide as the southern city wakes from its slumber. It is an awakening that is catching the attention of investors both in and outside South Australia and is being driven by some visionary thinking, according to the locals.
Colliers International director of commercial leasing Adelaide, James Young, is reluctant to label Adelaide’s renaissance a boom, but says there is certainly something exciting the market. “I think South Australia is in wake-up mode. I think that there are people who are looking forward to really tackling the next decade head-on, with very productive solutions to business and productive ideas, and that is the boom,” he says. “That is the change in thought processes that is allowing a lot of this to happen É and that’s the real boom for South Australia, people are starting to think that things can happen.”
The focus of current commercial activity and the source of some very high expectations in the local market is the ambitious City Central development. Young describes it as Cir_cular Quay meets Martin Place meets Australia Square meets Federation Square. This paints an eclectic image, but the point is that City Central is designed to be the type of iconic commercial centrepiece the city has so far lacked.
“My expectation is that it will reposition the CBD. It’s difficult for people to visualise the extent of what the vision is because it’s not here to tangibly grasp and walk past,” Young says.
Other significant developments breathing new life into the CBD include the 13,000 square metre Commonwealth Law Courts building on Angas Street and the 7000 square metre Minter Ellison building on Gouger Street. In addition, the long-neglected Old Tram Barn site opposite the Commonwealth Law Courts, is the subject of plans by the Catholic Church for a multi-million dollar commercial development and extension of neighbouring St Aloysius College.
Jones Lang LaSalle’s Kym Hutchins agrees that there is a new attitude. “What we’ve seen in recent times is really a readjustment of the market. Somebody was holding a lid on it. Companies have prospered. They’ve done a lot of good things and now they’re in expan_sion mode É on top of which the government is helping and it’s just great timing.”
Beyond the city
Other beacon developments in and around Adelaide include the Hold_fast Shores redevelopment, new infrastructure at Port Adelaide – including a new bridge and rail bridge – and the $230 million redevel_opment of Adelaide Airport, including $106 million dollars worth of associated developments.
The airport hub is already a major focus outside the Adelaide CBD thanks to the $10 million Harbour Town shopping complex and the expectation that home furnishings retailer Ikea will build a $40 million store on a seven-hectare site west of the airport. A $50 mil_lion business park and $10 million golf course are also on the drawing board.
The active improvement of transport towards Port Adelaide and beyond is already having an impact on the landscape, with the Port River Expressway under construction, along with a new rail bridge across the Port River. Improved transport infrastructure will be complemented by a new $109 million Outer Harbour grain terminal and a $55 mil_lion plan to deepen Outer Harbour for modern grain freighters.
Planned utilisation by General Motors Holden (GMH) of the neighbouring $100 mil_lion Edinburgh Park development is another impetus for growth in the city. Formerly a defence site, the 400-plus hectares of land could be subdivided by the Land Management Corporation. Daniel De Conno, Jones Lang LaSalle manager, investor services, says GMH is keen to have associated industries involved. “They’re looking at getting all of the suppliers that are tier one [established there] so they supply critical components, [and] co-locate adjacent to each other so they can all run their parts into Holden as required. That’s where we’ve got a number of projects in the final throes at the moment,” he says.
De Conno is another who believes there is a palpable sense of momentum in the Adelaide market at the moment. “Over the last 18 months in particular it’s taken off in many ways É when you see speculative development taking place aimed at owner/occupiers it’s a sign the market’s very active”.
It is difficult to think of an area around Adelaide where it is not hap_pening. For instance, manufacturing-based Lonsdale is being pulled along by the bullish market. Other government projects unifying the thrust are a $20 million upgrade to the Le Fevre Peninsula rail freight corridor, which will allow extra freight to be moved more efficiently from Birkenhead to Outer Harbour. Other infrastructure initiatives include a $20 million plan to support Flinders Ports and Ausbulk in developing integrated infrastructure services at Outer Harbour, a $43 million plan to upgrade the South Road north/south corridor and a $2 million dollar kickstart towards an upgrade of Kangaroo Island’s elec_tricity supply.
Dealer wins
A sign of the interest in the Adelaide market is the number of recent and comparatively high-value deals brokered in the city. The worst-kept secret has to be the sale of Santos House, Adelaide’s tallest build_ing, which achieved an estimated $100 mil_lion when it was snapped up by boutique funds manager SAITeysMcMahon. While nothing was set in concrete when CPG went to press, it appears the 31-storey tower record sale will go through. It certainly will not douse the upbeat sentiment in Adelaide among commer_cial property agencies, nor hurt the South Aus_tralian economy overall, which was recently described as the strongest in 10 years by BankSA. Starting with the sale of 100 Way_mouth Street in January 2003 for $31 million, then the Myer Centre in October 2003 for a record $231 million, both by CBRE, a raft of high-profile commercial property deals have successfully been negotiated.
CBRE Adelaide managing director, Craig Shute, says the big sales may not be a coinci_dence. “Certainly there’s a few offshore investors who have been looking seriously at selling due to the strength of the real estate prices in the market and combining that with the strength of the Australian dollar, it’s certainly given them the stimulus to consider selling,” he says, adding that “quite a few properties sold were owned by offshore investors.”
Shute describes Adelaide as ‘price-pointed’. “Right up to $3 million these days is a lot of mum and dad investors, from $3 million to $5 million it’s the more wealthy individuals, then from $5 million to $15 million it’s a combina_tion of local private syndicates, wealthy indi_viduals and once you get to $15 million all of a sudden you’re attractive to eastern state institutions and trusts.”
The next big sale likely to attract a lot of attention is the historic Regent Arcade owned by St Peters College, likely to go for $25 million-$30 million. It was bequeathed to the college almost a century ago, but with the closure of the Regent Cinema the school does not have the financial clout to redevelop.
Managing director of Jones Lang LaSalle Adelaide, Chris Redmond, says buyers have shown keen interest and indicated they want to be informed when it is officially for sale. “There’s a possibility of a super_store É but it’s going to require conversion, so there’s building works associated with that.”
The property is aimed at institutional-style investors, including syn_dicates and private investors. Redmond has also just put 93 Rundle Mall on the market seeking a figure in the $4 million-$5 million range.
On the shore
Holdfast Shores has been a kind of engine room for the state for some years that has created a focus for the commer_cial sector, despite the howls of protest from local residents. The $25 million final retail stage was released late June with nine single and double storey shops. CBRE’s Shute believes the city and outer major centres will eventually synchronise with the arrival of new infrastruc_ture in the Port Adelaide region, including a new main road.
“I think the new stage of Holdfast Shores certainly provides that critical link to the marina and Jetty Road, and I think all of a sudden that development will really start to work from a commercial and retail point of view, because you’ll have that critical link,” Shute says.
Shute points to Gawler, Mt Barker and Victor Harbour as the fastest growing areas in the state. “With zoning and planning there’s only so many areas that can be developed. Certainly in places like Mt Barker the amount of com_mercial retail development they’ve secured in the last five years is phenomenal.” Generally the advent of the Heysen Tunnels has been credited with opening up the Adelaide Hills and beachside zones to keen buyers by making them more accessible and reducing travel times.
In recent years prices have consistently climbed along the coastal areas of South Aus_tralia, and now one of the latest offerings, the Yilki Store off Encounter Bay, is set to test the limits. A landmark site with ocean views, the 2000 square metre site is likely to become a ‘satellite’ development, according to Gary Taplin of Brock Commercial.
“Blocks of land down there are selling for anything between $400,000 and $800,000. There are only two allotments in that area zoned like this, and this is why it’s going to be a unique offering.”
Brock Commercial is claiming a record price for the sale of a site in Ocean Street, Victor Harbour, now being fully developed as National Pharmacies. “We created a new record for land prices in Ocean Street, the main retail street in Victor Harbour” Taplin says, with a sale price of around $720,000 “but on a rate per square metre [it is] more than double the previous highest price”. The com_pany also sold the Family Inn Motel, Port Elliot Road, Hayborough for $1.15 million “plus bits and pieces”. That has now been demolished and will make way for apartments, and a liquor shop leased to Woolworths on South Road, Ridleyton, sold for about $1,070,000 with a 6.8% yield.
Brock’s Rory Butterworth says some retail shopping centres sold pre-Christmas and there is still intense interest. “We know that there are people out there if one comes on the market, they’ll jump all over it.” One centre at Glenelg sold at a 7.2% return, another at Blackwood for 8.1%. Other recent major sales include the Parkside Hotel and Motel through Jones Lang LaSalle by Intercontinental Hotels Group for $11 million, the AMP building at 1 King William Street for $27.1 million through CBRE and the Zurich building sold for $21.5 million to Angeat Holdings.
“The demand for investment property is unable to be serviced. I think what it means is that irrespective of what interest rates or the economy does in general, which all looks very positive at the moment – particularly for South Australia – it means this market is likely to con_tinue the way it is for at least another 12 months ... maybe even a little bit longer than that,” Brock Commercial director, Terry Good_win, says. n
By Josephine Stott
Commercial Property Gazette
5 August 2004
From port to airport and throughout the heart of the CBD there is a quick_ening pulse running through Adelaide as the southern city wakes from its slumber. It is an awakening that is catching the attention of investors both in and outside South Australia and is being driven by some visionary thinking, according to the locals.
Colliers International director of commercial leasing Adelaide, James Young, is reluctant to label Adelaide’s renaissance a boom, but says there is certainly something exciting the market. “I think South Australia is in wake-up mode. I think that there are people who are looking forward to really tackling the next decade head-on, with very productive solutions to business and productive ideas, and that is the boom,” he says. “That is the change in thought processes that is allowing a lot of this to happen É and that’s the real boom for South Australia, people are starting to think that things can happen.”
The focus of current commercial activity and the source of some very high expectations in the local market is the ambitious City Central development. Young describes it as Cir_cular Quay meets Martin Place meets Australia Square meets Federation Square. This paints an eclectic image, but the point is that City Central is designed to be the type of iconic commercial centrepiece the city has so far lacked.
“My expectation is that it will reposition the CBD. It’s difficult for people to visualise the extent of what the vision is because it’s not here to tangibly grasp and walk past,” Young says.
Other significant developments breathing new life into the CBD include the 13,000 square metre Commonwealth Law Courts building on Angas Street and the 7000 square metre Minter Ellison building on Gouger Street. In addition, the long-neglected Old Tram Barn site opposite the Commonwealth Law Courts, is the subject of plans by the Catholic Church for a multi-million dollar commercial development and extension of neighbouring St Aloysius College.
Jones Lang LaSalle’s Kym Hutchins agrees that there is a new attitude. “What we’ve seen in recent times is really a readjustment of the market. Somebody was holding a lid on it. Companies have prospered. They’ve done a lot of good things and now they’re in expan_sion mode É on top of which the government is helping and it’s just great timing.”
Beyond the city
Other beacon developments in and around Adelaide include the Hold_fast Shores redevelopment, new infrastructure at Port Adelaide – including a new bridge and rail bridge – and the $230 million redevel_opment of Adelaide Airport, including $106 million dollars worth of associated developments.
The airport hub is already a major focus outside the Adelaide CBD thanks to the $10 million Harbour Town shopping complex and the expectation that home furnishings retailer Ikea will build a $40 million store on a seven-hectare site west of the airport. A $50 mil_lion business park and $10 million golf course are also on the drawing board.
The active improvement of transport towards Port Adelaide and beyond is already having an impact on the landscape, with the Port River Expressway under construction, along with a new rail bridge across the Port River. Improved transport infrastructure will be complemented by a new $109 million Outer Harbour grain terminal and a $55 mil_lion plan to deepen Outer Harbour for modern grain freighters.
Planned utilisation by General Motors Holden (GMH) of the neighbouring $100 mil_lion Edinburgh Park development is another impetus for growth in the city. Formerly a defence site, the 400-plus hectares of land could be subdivided by the Land Management Corporation. Daniel De Conno, Jones Lang LaSalle manager, investor services, says GMH is keen to have associated industries involved. “They’re looking at getting all of the suppliers that are tier one [established there] so they supply critical components, [and] co-locate adjacent to each other so they can all run their parts into Holden as required. That’s where we’ve got a number of projects in the final throes at the moment,” he says.
De Conno is another who believes there is a palpable sense of momentum in the Adelaide market at the moment. “Over the last 18 months in particular it’s taken off in many ways É when you see speculative development taking place aimed at owner/occupiers it’s a sign the market’s very active”.
It is difficult to think of an area around Adelaide where it is not hap_pening. For instance, manufacturing-based Lonsdale is being pulled along by the bullish market. Other government projects unifying the thrust are a $20 million upgrade to the Le Fevre Peninsula rail freight corridor, which will allow extra freight to be moved more efficiently from Birkenhead to Outer Harbour. Other infrastructure initiatives include a $20 million plan to support Flinders Ports and Ausbulk in developing integrated infrastructure services at Outer Harbour, a $43 million plan to upgrade the South Road north/south corridor and a $2 million dollar kickstart towards an upgrade of Kangaroo Island’s elec_tricity supply.
Dealer wins
A sign of the interest in the Adelaide market is the number of recent and comparatively high-value deals brokered in the city. The worst-kept secret has to be the sale of Santos House, Adelaide’s tallest build_ing, which achieved an estimated $100 mil_lion when it was snapped up by boutique funds manager SAITeysMcMahon. While nothing was set in concrete when CPG went to press, it appears the 31-storey tower record sale will go through. It certainly will not douse the upbeat sentiment in Adelaide among commer_cial property agencies, nor hurt the South Aus_tralian economy overall, which was recently described as the strongest in 10 years by BankSA. Starting with the sale of 100 Way_mouth Street in January 2003 for $31 million, then the Myer Centre in October 2003 for a record $231 million, both by CBRE, a raft of high-profile commercial property deals have successfully been negotiated.
CBRE Adelaide managing director, Craig Shute, says the big sales may not be a coinci_dence. “Certainly there’s a few offshore investors who have been looking seriously at selling due to the strength of the real estate prices in the market and combining that with the strength of the Australian dollar, it’s certainly given them the stimulus to consider selling,” he says, adding that “quite a few properties sold were owned by offshore investors.”
Shute describes Adelaide as ‘price-pointed’. “Right up to $3 million these days is a lot of mum and dad investors, from $3 million to $5 million it’s the more wealthy individuals, then from $5 million to $15 million it’s a combina_tion of local private syndicates, wealthy indi_viduals and once you get to $15 million all of a sudden you’re attractive to eastern state institutions and trusts.”
The next big sale likely to attract a lot of attention is the historic Regent Arcade owned by St Peters College, likely to go for $25 million-$30 million. It was bequeathed to the college almost a century ago, but with the closure of the Regent Cinema the school does not have the financial clout to redevelop.
Managing director of Jones Lang LaSalle Adelaide, Chris Redmond, says buyers have shown keen interest and indicated they want to be informed when it is officially for sale. “There’s a possibility of a super_store É but it’s going to require conversion, so there’s building works associated with that.”
The property is aimed at institutional-style investors, including syn_dicates and private investors. Redmond has also just put 93 Rundle Mall on the market seeking a figure in the $4 million-$5 million range.
On the shore
Holdfast Shores has been a kind of engine room for the state for some years that has created a focus for the commer_cial sector, despite the howls of protest from local residents. The $25 million final retail stage was released late June with nine single and double storey shops. CBRE’s Shute believes the city and outer major centres will eventually synchronise with the arrival of new infrastruc_ture in the Port Adelaide region, including a new main road.
“I think the new stage of Holdfast Shores certainly provides that critical link to the marina and Jetty Road, and I think all of a sudden that development will really start to work from a commercial and retail point of view, because you’ll have that critical link,” Shute says.
Shute points to Gawler, Mt Barker and Victor Harbour as the fastest growing areas in the state. “With zoning and planning there’s only so many areas that can be developed. Certainly in places like Mt Barker the amount of com_mercial retail development they’ve secured in the last five years is phenomenal.” Generally the advent of the Heysen Tunnels has been credited with opening up the Adelaide Hills and beachside zones to keen buyers by making them more accessible and reducing travel times.
In recent years prices have consistently climbed along the coastal areas of South Aus_tralia, and now one of the latest offerings, the Yilki Store off Encounter Bay, is set to test the limits. A landmark site with ocean views, the 2000 square metre site is likely to become a ‘satellite’ development, according to Gary Taplin of Brock Commercial.
“Blocks of land down there are selling for anything between $400,000 and $800,000. There are only two allotments in that area zoned like this, and this is why it’s going to be a unique offering.”
Brock Commercial is claiming a record price for the sale of a site in Ocean Street, Victor Harbour, now being fully developed as National Pharmacies. “We created a new record for land prices in Ocean Street, the main retail street in Victor Harbour” Taplin says, with a sale price of around $720,000 “but on a rate per square metre [it is] more than double the previous highest price”. The com_pany also sold the Family Inn Motel, Port Elliot Road, Hayborough for $1.15 million “plus bits and pieces”. That has now been demolished and will make way for apartments, and a liquor shop leased to Woolworths on South Road, Ridleyton, sold for about $1,070,000 with a 6.8% yield.
Brock’s Rory Butterworth says some retail shopping centres sold pre-Christmas and there is still intense interest. “We know that there are people out there if one comes on the market, they’ll jump all over it.” One centre at Glenelg sold at a 7.2% return, another at Blackwood for 8.1%. Other recent major sales include the Parkside Hotel and Motel through Jones Lang LaSalle by Intercontinental Hotels Group for $11 million, the AMP building at 1 King William Street for $27.1 million through CBRE and the Zurich building sold for $21.5 million to Angeat Holdings.
“The demand for investment property is unable to be serviced. I think what it means is that irrespective of what interest rates or the economy does in general, which all looks very positive at the moment – particularly for South Australia – it means this market is likely to con_tinue the way it is for at least another 12 months ... maybe even a little bit longer than that,” Brock Commercial director, Terry Good_win, says. n