The demand for inner-city commercial assets offering income security continues to strengthen, with Barwon Investment Partners purchasing 55 Russell Street, South Brisbane, from Forza Capital for $34.7 million on a 5% yield.

The three-level A-Grade commercial asset was sold fully leased to three departments of the Queensland Government, including Queensland Health, which covers both Children’s Health and the Queensland Aboriginal and Islander Health Council. With a weighted average lease expiry (WALE) of almost four years, the long-term government tenants have occupied the building for more than 12 years, with Queensland Health attracted to its proximity to both Queensland’s Children’s Hospital and Mater Hospitals.

Spanning 4,081 sqm in net lettable area across three levels, the property occupies a high-profile location on the corner of Russell and Edmonstone Streets in the heart of South Brisbane, just 1.1km from the Brisbane CBD. The building has a 6-star NABERS rating as well as offering 50 on-site car parks.

The building was sold with significant redevelopment potential. With flexible principal centre zoning in place, the 2,153 sqm site can host a mixed-use tower with a code assessable height of 12 storeys and rare 1,500 sqm floor plates.

The deal was exclusively managed on behalf of the vendor by Cushman & Wakefield’s Middle Markets team of Frederic Le Fanue, Mike Walsh and Peter Court who initially brokered the sale of the site to Forza Capital in 2019. The deal represents a rate of $8,500 per sqm on net lettable area.

Cushman & Wakefield Associate Director of Middle Markets, Frederic Le Fanue, said: “Investors continue to seek well located assets with exceptional lease covenants and track record, which is driving strong demand for buildings leased to health and government tenants.”

“The Cushman & Wakefield Middle Markets team has now transacted over $300m in health-related assets in only the past 12 months, and we don’t envisage allocation of capital towards the sector will taper anytime soon.”

“South Brisbane has enjoyed significant gentrification over the past decade and benefitted from major projects like the $800m West Village and Fish Lane entertainment area. This backdrop provides exceptional future redevelopment and value-add potential for 55 Russell Street.”

Barwon Investment Partners Portfolio Manager Brendan See, said: “We are well capitalised and looking to deploy funds into all types of real estate throughout the healthcare continuum from hospitals and medical centres through to disability services and medical offices. We believe that 55 Russell Street is a terrific addition to the portfolio.”

Forza Capital Director, Ashley Wain, said: “Once we had fully leased the property to Queensland Government tenants, we then focussed our efforts on environmental initiatives which saw the building achieve a 6 Star NABERS rating, the first existing asset in the Brisbane to do so”.

“We are very happy with the investment performance on this transaction. We were intending to hold the asset longer term, but when the off-market offer was presented by the Cushman & Wakefield team, it made sense to divest.”

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