October 2014 – Wollongong CBD Investment

24 October, 2014 / Vanessa Rader and Ben Mostyn

To the south of Sydney the capital of the Illawarra Regional Centre is Wollongong located an hour and a half from the Sydney CBD.

Being in a regional area of New South Wales this market has a broad mix of office types, qualities and a wide range of occupiers or tenant types. With GPT’s recent redevelopment of Wollongong Central attention has been drawn to this now more vibrant living city. This institutional investment into the city centre showcases support for the future growth of Wollongong as a residential, retail and office location.

Historically the Wollongong market has seen limited major movement in stock levels, the current total office stock currently 152,000sqm which has increased 10.6% since reporting in this market commenced in January 2008. Most recently there has been a 6,600sqm A grade addition at 43–53 Kembla Street, this quality property boasts a 4.5 NABERS rating and the ability to provide 1,500sqm floor plates. The bulk of stock in this market is made up of the handful of larger, quality A grade assets totalling 73,400sqm while a greater number of smaller C grade buildings add another 43,892sqm to the market. Occupancy levels are skewed towards prime stock, with A grade vacancy currently 10.0%, this primarily due to this new addition, however it is expected that this stock has been absorbed since the January 2014 vacancy count which could result in current vacancy closer to 2.0%. B grade vacancy was recorded at a similar rate at 10.3% while C and D grade vacancy are 12.9% and 14.9% respectively.

Investment levels into the CBD have been rather volatile over the last few years. This is more in line with the lack of investment grade stock available in the market and the nature of a tightly held private investor market.

Investment levels into the CBD have been rather volatile over the last few years. This is more in line with the lack of investment grade stock available in the market and the nature of a tightly held private investor market. While there is institutional investment in this market, these assets are not traded regularly keeping total investment levels down. Looking back into the 1990’s, turnover was reasonably low yet number of transactions high, as time has passed we see the number of deals decrease and some uptick in total volumes suggesting a positive change in capital values. In 2013, Wollongong CBD saw a historical high in volume of transactions, with over $71 million changing hands across 20 transactions. This high volume attributed to two A grade transactions to The Trust Company being 84 Crown Street for $23.9 million (May 2013) and 41–43 Burelli Street for $23.27 million (April 2013). The both properties were sold on a fully leased basis and had a reported yield of 10.39% and 11.74% respectively, a high returning investment for the Superannuation group. 2014 to date has had 10 transactions which only total $11.036 million, most of these being smaller strata properties with the exception of 243–249 Crown Street which sold in March 2014 for $6.02 million.

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Vanessa Rader (Head of Research)
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