Canberra's office market primed for a record-breaking year

Canberra’s top-end office market could be headed for a record-breaking year after this month’s sale of the Geoscience Building in Symonston for about $363.5 million.

The purchase by property fund Charter Hall represented the biggest commercial sale in ACT history, but that might not be the end of the 2022 story.

Canberra Commercial executive director of sales and leasing, Michael Ceacis, says that if the now on-market ATO building in the city sells before year-end – along with a couple of smaller city buildings – it could push total annual sales through the $1.6 billion benchmark.

“That was the figure set in 2021 when 16 properties were sold,” he says.

Ceacis says sales of Canberra office buildings above $10 million have soared in recent years, which underscores the ACT’s reputation as a safe haven by national and global investors — and its position as the nation’s next biggest office market behind Sydney and Melbourne.

For example, in 2019, there were 11 sales that reaped $724 million. In 2020, that figure plunged because of the pandemic, with only four office sales selling for a total of $89.4 million.

The following year, despite the ongoing COVID environment, commercial sales bounced back dramatically to $1.6 billion with an average purchase price of around $90 million, according to Canberra Commercial data.

“That represented the release of a lot of built-up demand within global investment funds who, as we began to live with COVID, went on a calculated spending spree with security at the forefront of their minds,” Ceacis says.

“Investors know they might be able to get increased capital appreciation in the bigger Australian cities. But the long-term security offered by Canberra’s big pool of committed government tenants cannot be matched anywhere in the country.”

Ceacis says big institutional investors definitely have an ongoing love affair with the capital and are continually asking him what’s coming to market and when.

Their focus is now widening to another sector where they are prepared to spend a big war chest full of cash.

“The next big thing for them is an investment in the build-to-rent market,” he says.

“Institutional funds are looking to snap up buildings and dwellings that will likely become part of the response to the critical need for affordable housing.”

For example, ANZ has committed $10 billion worth of investment by 2030 to deliver more affordable and sustainable homes.

Ceacis says this appetite from institutional investors for build-to-rent projects may be good news for Canberra’s B, C and D-grade offices.

Office spaces are graded according to an efficiency rating with grade A office buildings considered top-tier assets in commercial investment. 

“These type of buildings may come onto the radar for build-to-rent investors, subject to flexibility in relevant zoning and their potential for repurposing,” Ceacis says.