Real I.S. Australia have entered into contracts to purchase two adjoining Surry Hills office buildings sold from private developer Cornerstone Property Group. Surry Hills House and No.1 Lacey Sold. JLL’s Director of Capital Markets- (NSW), Mitch Noonan and Senior Director of Capital Markets- (NSW), James Aroney together with IB Property’s Steffan Ippolito facilitated the sale. 

Cornerstone offered the buildings known as Surry Hills House and No.1 Lacey to market in June via JLL and IB Property, following the completion of an extensive refurbishment program, strong unsolicited purchaser interest and in order to prepare themselves for a new cycle of development opportunities.

The assets are considered to offer some of the best office accommodation in Surry Hills with tech unicorn Canva as an anchor tenant. Both buildings are located on the corner of Kippax Street and Waterloo Street and comprise a total of 6,902 sqm of NLA.

The deal marks Real I.S. Australia’s twelfth acquisition in Australia and reflects their strong commitment to the local market. The deal was struck at approximately $97 million, making it the largest ever office transaction in Surry Hills.

Real I.S. Australia believes the asset’s prime fundamentals include the core Surry Hills location, exposure to technology tenants and close proximity to Central Station that will likely be key factors contributing to the asset’s strong performance in the future.

Director of Real I.S. Australia, Maximillian Kube said, “Surry Hills House and No.1 Lacey are undoubtedly some of the best office assets in Surry Hills and we have strong confidence they will continue to perform well into the future.”

Real I.S. have currently over $16 billion of funds under management and thereof 1.4 billion in Australia. The acquisition is in line with the strategy to build exposure to prime office and logistics buildings, located in core markets with resilient cash flows.

JLL’s Director of Capital Markets- (NSW), Mitch Noonan and Senior Director of Capital Markets- (NSW), James Aroney together with IB Property’s Steffan Ippolito facilitated the sale of Surry Hills House and No.1 Lacey.

Mr Noonan said, “As the largest office investment transaction on record in Surry Hills, together with the depth of bidder participation from offshore and domestic capital sources, this is a real vote of confidence in the outlook for prime office assets in the sub-market.”

Mr Ippolito said, “This transaction and the continued strong leasing activity within the building demonstrates the strength of the City Fringe office market and the flight to quality in a post COVID environment.”

The assets were 90% leased at the time of sale with a WALE of three years and the transaction was granted Foreign Investment Review Board (FIRB) approval within four weeks from lodgement.

According to JLL Research, Surry Hills currently features a low vacancy rate of 4.4% and is home to many technology and media tenants, with the area expected for a further boost with the nearby development of the Central Technology Precinct, set for completion in 2024-2025 with Atlassian as an anchoring tenant.

Mr Aroney added, “Surry Hills has been one of the strongest performing leasing markets in Sydney with deep investor demand over the last five years and this transaction confirms that.”

Sam Brown of K&L Gates acted as Legal Adviser to Real I.S. Australia and Tony D’Agostino of Swaab’s advised Cornerstone.