A converted warehouse-style office in Sydney’s Surry Hills has sold under the hammer for $24 million, reflecting an initial yield of around 4.23%.
A local private investor bought the recently refurbished property at 1 Butt Street, which offers 1,349 sqm of net lettable area and is fully leased to Fin Design until 2025.
The sale marks the highest price ever achieved at auction in Surry Hills for a commercial asset.
The building envelop is underdeveloped on the current planning restrictions, and benefits from flexible B4 Mixed-Use zoning.
The property was sold by JLL’s Capital Markets (NSW) Senior Director James Aroney and Director Mitch Noonan, alongside Director of IB Property Shane Blackett.
“The tight 4.23% yield and strong $17,790/sqm capital value show continued confidence in the city fringe market, with a number of bidders seeking exposure to the high-performing sub-market,” Aroney said.
“While the price gap between the CBD and Surry Hills markets is shrinking, Surry Hills presents a highly compelling value proposition relative to the Sydney CBD Core, both from a capital value and rent perspective, and is an area that’s becoming increasingly sought after.”
Aroney said there was strong capital growth in the area due to the establishment of the ‘Tech Central’ precinct, the approved Oxford Street transformation and the $3 billion Central Station upgrade.
Noonan said they were seeing more private investors move up the value curve, deepening the pool of private investors who were able to buy higher-priced assets under auction conditions.
“With elevated equity markets and the suspension of overseas travel, there are record amounts of cash being held by investors who are looking for secure investments,” Noonan said.
Surry Hills and the surrounding city fringe has historically had one of the lowest vacancy rates in NSW with headline vacancy at 8.5%, compared to 13.2% of the Sydney CBD market, according to JLL research.
Recent office deals include Keppel REIT’s purchase of a grade-A office development in North Sydney for $327.7 million and Dexus’ sale of a Sydney CBD office to Charter Hall’s prime office fund for $385 million.
Last month, ISPT bought the headquarters of Victoria’s Country Fire Authority in Melbourne’s eastern suburbs for $35.8 million, while Cromwell Property Group bought a 24-storey office building in Brisbane’s CBD for $184.7 million.