The Australian arm of Singapore-headquartered ARA Asset Management has lodged plans for a 21-storey office tower at Melbourne’s landmark Southgate site.
The tower will add 39,000sq m of net lettable area to Melbourne’s large supply pipeline of office stock, with the asset set to come online in June 2024.
The Southgate site comprises an existing 76,600sq m of commercial space across the Herald Weekly Tower and IBM Centre and is home to the four-level Southgate complex, which will be demolished in early 2021 to make way for the tower.
ARA acquired the 2.1-hectare site from Dexus in 2016 for $578 million—representing a cap rate of 6.5 per cent at the time. The site is marketed as the “key connector” to Melbourne’s popular arts precinct, opposite Flinders Street Station.
“It is an interesting time to push ahead with an office project, but it is difficult in this environment to tell where the market is going for a project that will complete, at the earliest, in 2024,” Neville said.
“While we do expect Melbourne’s current vacancy to push out, there’s some offsetting factors—staff density is decreasing, where it used to be trending towards 1:8 [staff to sq m] it is now closer to 1:12, if not even further depending on how people use space in the future.
“The question is: what is the right opportunity for occupiers in that time period, what are their needs and requirements and is this solution one that is better than the competitive set?”
The Fender Katsalidis-designed office tower will incorporate more than 10,000sq m of retail, and add 2,000sq m of north-facing public space to the ground plane. The tower is aiming for 5 Star Green Star and 5.5-star Nabers ratings.
The $800 million Southgate development will be funded 50:50 through ARA’s Singapore-listed Suntec REIT and an ARA-backed private fund.
More than 4,000sq m of additional open space has been incorporated into the design, while Neville says new bars and restaurants will help revitalise the precinct.
“We want Southgate to become a place that people love working and playing in, and want to return to time and again.”
ARA estimates the Southgate project will generate 343 direct full-time jobs, and add more than $400 million in direct gross value to the Victorian economy each year during the construction period.
The acquisitive fund manager, which entered Australia in 2014 upon acquiring 177 Pacific Highway in North Sydney, has close to $100 billion in assets under management across 28 countries.
In 2019, the group was embroiled in a highly-publicised spat with Brisbane funds giant Cromwell Property Group, in which it owns a 24 per cent stake.
In early March, ARA acquired a majority stake in logistics giant Logos Group.