CapitaLand Investment acquires office tower in Melbourne’s CBD

CapitaLand Investment acquires office tower in Melbourne’s CBD
The 22-storey office building, 120 Spencer Street, has a net lettable area of 32,000 square metres (sqm). Image: CapitaLand

Singapore-based CapitaLand Investment (CLI) has acquired a freehold office tower in the Western Core of Melbourne’s Central Business District for its flagship regional core-plus fund, CapitaLand Open End Real Estate Fund (COREF).  

The acquisition marks CLI’s fifth investment in Australia within six months.

CapitaLand said this is COREF’s fourth in Asia Pacific with total investment amounting to approximately US$900 million since the fund’s establishment in August 2021.

The 22-storey office building, 120 Spencer Street, has a net lettable area of 32,000 square metres (sqm).  The property is strategically located opposite the Southern Cross Station, a major public transport hub that connects to the wider Melbourne region, with intra-city tram lines at its doorstep.  

It also benefits from the recent revitalisation of the Western Core, led by the development of the Docklands precinct, the addition of new premium grade office towers, refurbishment of existing assets and migration of tenants, including many prominent occupiers, to the precinct.

Paul Toussaint, Managing Director for Australia, CLI, said: “Australia is one of CLI’s focus markets where we see significant potential for growth. CLI has invested about A$1.5 billion in five quality assets in the country held through its private and listed funds in the past six months.  120 Spencer Street is CLI’s latest deal in Australia, sourced and executed by our experienced local team. ”

”In view of the post-COVID recovery and companies’ steady return to work, we believe that the Australian office market is showing signs of growth that will overcome the near-term challenges of vacancy and tenant incentive levels.  120 Spencer Street is well-positioned to capitalise on this given its strong WALE, vibrant location benefiting from the area’s rejuvenation, and potential for enhancements,” he added.

120 Spencer Street has a strong committed office occupancy of 97.5% and long weighted average lease expiry (WALE) of 6.7 years.  Its tenant base includes WeWork and prominent local educational institutions such as Central Queensland University and Redhill Education. 

Over the longer-term, the property has strong embedded value given its prime island site with triple street frontages and a potential 22,000 sqm of unutilised gross floor area.  Over the past five years, the property has undergone A$30 million of upgrading including the recent installation of energy-efficient mechanical and engineering equipment. 

Since 1 November 2021, 120 Spencer Street has operated fully on green electricity and has contracted to do so for the next 10 years.  It has also received the NABERS (National Australian Built Environment Rating System) Energy 4-Star and NABERS Water 5.5-Star certifications.