Savills Research South Australia Briefing Adelaide CBD Office Highlights Adelaide CBD office vacancy rate declines to its lowest rate since 2014, underpinned by tenant positive demand; There are a number of green shoots emerging on the back of defence, engineering and mining contracts being awarded recently, with examples of companies relocating to Adelaide and/or taking expansion space; More transaction activity in the $100 million plus category has been seen in the past two years than it has historically; Prime grade yields are being traded well above those of similar assets in Sydney and Melbourne, however the wide yield spread suggests scope for further compression within this market. A Grade Averages* Latest 12mo Diff Outlook Rental N.F. ($/sq m) 370 (345) +0.0% (+0.0%) Incentives (%) 33.0 (20.8) +75bps (-50bps) Rental N.E ($/sq m) 210 (260) -19.2% (+0.0%) Yield Market (%) 7.25 (7.50) -25bps (-25bps) IRR (%) 8.25 (8.65) +00bps (+00bps) Capital Values ($/sq m) 5,000 (4,400) +0.0% (+0.0%) Demand & Supply Latest PCP** Vacancy (%) 14.7 (11.0) 16.1 (10.1) Net Absorb. ( 000sq m) 19.8 (-0.8) 6.0 (2.0) Stock U/C ( 000sq m) 24.5 24.5 - % of market 1.7% - % committed 90% *Adelaide Fringe metrics in brackets **PCP = Previous Corresponding Period
Report Contents Vacancy & Availability 3 Leasing Activity & Demand 4 Sales Activity 6 Supply 8 Development Map 9 Rents & Outlook 10 Appendix: Adelaide Fringe Tables 11 Key Indicators 12 Contacts 12 Shrabastee Mallik smallik@savills.com.au Head of Research For our latest national reports, visit savills.com.au/research To join Savills Research mailing list, please email research@savills.com.au Executive Summary In June 2018, the Federal Government confirmed the partnership agreement with BAE to build the nine future frigates as part of the $35 billion shipbuilding program. With the ships to being built in Adelaide, at Osborne, the project is expected to create 4,000 jobs nationally, with 1,500 direct in Osborne. Overall the shipbuilding plan is expected to create around 5,000 direct jobs in South Australia and possibly thousands of indirect jobs when the project starts in 2022. The South Australian economy is beginning to benefit from the new shipbuilding program with organic growth in office demand from Defence related industries being one by-product. Public investment in state infrastructure is also helping to buoy the jobs market with a significant rise in job advertisements noted recently that will support employment over the short to medium term. While the leasing market has been slow moving over the last three years, an upswing in demand is contributing to positive net absorption levels and another reduction in the overall vacancy rate. There had previously been a distinct gap between Prime and Secondary grade space but this is beginning to shrink, with demand Secondary grade space particularly in the Core underpinning office take-up. Starting to see signs that incentives are tapering off, particularly in prime or refurbished space, as competition on the supply-side for Prime grade space revives relocation and/or expansion plans. Investment appetite for Adelaide remains elevated and the purchaser profile indicates that the yield proposition on offer relative to the eastern seaboard is highly attractive to investors operating under a counter-cyclical strategy. PCA Summary Table Adelaide CBD (as at Jun-18) Premium A Grade Prime Secondary Total AUS CBD Total Stock ( 000sq m) 41.7 553.2 594.9 829.6 1,424.5 17,907.5 Total Vacancy ( 000sq m) 1.2 82.1 83.3 126.8 210.0 1,640.7 Vacancy (%) 2.8 (6.8) 14.8 (9.8) 14.0 (9.6) 15.3 (12.1) 14.7 (11.1) 9.2 (9.2) Net Absorption ( 000sq m) 3.1 (.5) -4.1 (12.4) -1.0 (13.0) 20.8 (-7.6) 19.8 (5.4) 149.3 (170.4) Net Absorption (%)* 8.2 (1.4) -0.9 (3.1) -0.2 (3.0) 3.1 (-1.0) 1.7 (0.5) 0.9 (1.1) Net Additions ( 000sq m) 0.0 (.0) 0.0 (20.1) 0.0 (20.1) 0.0 (1.5) 0.0 (21.6) -91.8 (283.0) Stock Additions ( 000sq m) 0.0 0.0 0.0 0.0 3.5 269.1 Stock Withdrawals ( 000sq m) 0.0 0.0 0.0 3.5 3.5 364.9 Net Additions (%) 0.0 (0.0) 0.0 (4.6) 0.0 (4.2) 0.0 (0.2) 0.0 (1.7) -0.5 (1.7) (10yr Averages shown in brackets); NB: Secondary Rents shown are for B Grade; All rents equivalent to whole floor mid-rise *As a percentage of occupied stock savills.com.au/research 2
Vacancy The Adelaide CBD office market vacancy rate decreased in the 12 months to June 2018, reaching 14.7%, down from 16.1% in June 2017. The market has recorded its third consecutive period of positive net absorption, also the highest level seen in five years, with flight to quality trend driving Premium vacancy to 2.8%, its lowest rate since 2012. Increasing competition on the supply-side for Prime grade stock had previously lead to a rise in backfill vacancy within Secondary space as these tenants relocate, however this trend seems to be subsiding as the divergence between Prime and Secondary vacancy rate begins to shrink. This trend comes on the back of owners looking to reposition buildings on a floor-by-floor basis to retain existing tenants. The absorption of B Grade space, albeit from a low base after several years of contraction has been driven by small business demand and a focus on reducing or maintaining overall occupancy costs. Historic Vacancy Rate Full Floor Availability by Period 20% 20% 18% 18% 16% 16% 14% 14% 12% 10% 8% 6% 4% 4% 2% 2% 0% 0% Prime Prime Total Total Secondary Secondary ADL ADL Fringe Fringe (Total) (Total) 50,000 50,000 45,000 45,000 40,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 5,000 00 Premium Premium (sq (sq m) m) A Grade A Grade (sq (sq m) m) In In 6 6 Mths Mths 6-12 6-12 Mths Mths 1-1 2 - Yrs 2 Yrs > 2 > Years 2 Years Source: PCA / Savills Research Full Floor Availability In Savills Prime Full Floor Availability Report, the state of the leasing market is assessed in a different manner to most vacancy surveys. The report considers Premium and A grade buildings in the city on a floor-by-floor basis, identifying whole floors competing for tenants - both now and in the future - including those under construction and refurbishment, along with backfill space created by pre-commitment. Compared to July 2017, the number of full floors available has decreased from 58 to 41 in July 2018. Of the 41 Prime floors, all are available for occupation within the next six months. All of this space is available for occupation as either direct or sub-lease vacancies. Further options exist for tenants seeking B grade buildings, with 41 full floors currently available to the market. The availability of larger contiguous areas remains limited, with just two 5,000 square metre opportunities being available in the market as at July 2018. By Grade By Precinct Total Premium A Grade Core Frame Fringe B Grade Total Prime Floors (No) 458 32 426 399 53 6 214 Total Prime NLA (sq m) 616,920 41,458 575,462 524,752 80,333 11,835 196,736 Prime Floors Available (No) 41 2 39 40 1-41 Prime Full Floor Avail. (sq m) 51,562 1,639 49,923 50,062 1,500-39,215 Prime Full Floor Avail. (%) 8.4% 4.0% 8.7% 9.5% 1.9% 0.0% 19.9% Max Contiguous Floors (No) 5-5 5 - - 4 Max Contiguous Area (sq m) 5,220-5,220 6,560 - - 6,226 savills.com.au/research 3
Leasing Activity & Demand In the 12 months to, Savills identified approximately 28,916 square metres of leasing activity (>1,000 square metres) in the Adelaide CBD office market. Of the 28,916 square metres identified as leased in Adelaide CBD in the last 12 months, Mining, Utilities & Industry Services was the dominant sector accounting for 37% of transactions by volume. This was followed by the Financial & Insurance sector with 17% of overall volumes. There are a number of green shoots emerging on the back of defence, engineering and mining contracts being awarded recently, with examples of companies relocating to Adelaide and/or taking expansion space, including Cooper Energy, Babcock International and Datacom, among others. BHP has leased approximately 10,000 square metres over eight floors on a 10-year pre-lease deal in the new GPO Tower, under construction. The deal follows the Attorney General s Department 12-year pre-commitment to circa 12,000 square metres in 2016. The Attorney General s Department will be relocating from 45 Pirie Street, which was acquired by Singapore-listed AEP Group for $105 million in August last year. Cooper Energy has long-term gas supply agreements AGL and Energy Australia and in December signed a new sale agreement with Origin Energy. The relocation to 70 Franklin Street recently to take up a full floor represents an expansion in floor space requirements for the group. Following a similar theme, Solar Reserve, a US solar energy company, was awarded the contract to build and supply solar energy in South Australia. The group has opened an Adelaide office, leasing space in 26 Flinders Street, along with a field office in Port Augusta where they are developing the Aurora Solar Energy Project. Babcock International, a global engineering support company, moved their Australasian headquarters from Brisbane to Adelaide last year as part of its Australian expansion plans, taking one floor in 70 Franklin Street. In January 2018, Babcock was awarded a $33 million contract to supply ground support equipment services to the Australian Defence Force. Babcock has recently taken expansion space over another floor in the building. Datacom has recently relocated from Findon to 118 Franklin Street to house around 100 staff after been contracted to roll-out the new TPG network. The group is also reportedly in negotiations to lease and refurbish the Tafe buildings at Tea Tree Gully into a new IT hub. Another example of organic office demand flow-on from defence industry contracts includes short-term project space. Fincantieri, the Italian shipbuilding company that also bid on the $35 billion Future Frigate program (now awarded to BAE), leased 370 square metres in 136 Frome Street. Leasing Activity by Size (> 500 square metres) Adelaide CBD 160,000 Core Frame 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - Leasing Activity by Tenant Type (> 500 square metres) Mining - 36.9% Prop & Bus Serv - 28.6% Fin & Ins - 17.1% IT & Comm - 13.2% Govt & Community - 4.1% Net Absorption vs. Growth in Professional Job Ads 40,000 Annual Net Abs. - ADL CBD Prof. Job Ads - SA 40% 30,000 30% 20,000 20% 10,000 10% - 0% (10,000) (10%) (20,000) (20%) (30,000) (30%) (40,000) (40%) Source: DOE / Savills Research savills.com.au/research 4
South Australia continues to show strength in regards to job opportunity, with a continued rise in job advertisements recently. Although coming from a low base, the growth in job advertisements in the last 12 months has been one of the largest nationally. The pull-back in automotive manufacturing has helped redirect the focus to other sectors, most significantly defence and health with significant capital investment underway. In addition to increased activity as a result of various defence projects, stamp duty on non-residential property transfers was abolished from July 2018. The newly elected state government plans to scrap payroll tax for all small businesses (employing an average of 25 employees) from 1 January 2019, with further details to be announced in their first budget. The abolition of stamp duty on non-residential transfers and other recent reforms helps to reduce costs to do business in the state, providing further opportunities for investment, growth and employment. Professional Job Advertisement Growth by State (Aug-18) WA 18.0% TAS 15.6% SA 15.2% VIC 12.7% AUS 11.6% QLD 11.3% NSW 9.9% NT 7.0% ACT 6.5% Source: DOE / Savills Research Recent Notable Leases (by Area Leased) Tenant Property Date NLA (sq m) Type Rent Term 141 King William St, Adelaide BHP Apr-18 10,056 p n.a 10 1 King William St, Adelaide Suncorp May-18 4,660 d n.a 7 19-21 Gouger St, Adelaide Thomson Geer Lawyers Nov-17 3,000 r n.a 10 118 Franklin St, Adelaide Datacom Mar-18 1,531 d n.a 5 11-29 Waymouth St, Adelaide Undisclosed Sep-18 1,452 d n.a n.a. 58-76 Franklin St, Adelaide Cooper Energy Sep-17 1,235 d n.a n.a. 91 King William St, Adelaide Attorney-General's Department of SA Jan-18 1,118 d 550 (G) 10 80 Flinders St, Adelaide Inabox Group Jan-18 1,072 d 532 (G) 7 44 Pirie St, Adelaide Game Plus Dec-17 1,067 d 295 (G) 8 170 Frome St, Adelaide AllScripts Mar-18 1,000 d n.a 7 Leasing Types: p = Pre-commitment, d = Direct, s = Sub-Lease, r = Renewal savills.com.au/research 5
Sales Activity In the 12 months to, Savills has identified approximately $735 million worth of office transactions (greater than $5 million) in the Adelaide CBD area. Throughout the past decade, investment volumes have averaged around $410 million annually but this really has been led by trends in the first half of that decade, with the last five years averaging more than $500 million annually. The market is now seeing more activity in the $100 million plus segment than it has historically. More than $1.4 billion in assets greater than $100 million in value have traded since 2013, this compares to just circa $300 million between 2003 and 2012. The quality of assets that have been presented in the last two to three years has been high, which bodes well for institutions and off-shore groups looking at comparable assets in other markets that are sitting on much lower yield ranges. The largest deal in the first half of 2018 was Centuria Property Funds and Lederer Group s joint acquisition of 80 Grenfell Street from Blackstone Group for $184.6 million. Blackstone originally acquired the office tower in 2016 as part of a larger acquisition, which included the retail component known as Rundle Place for $400 million. The 11-level offer tower, which is 96% leased to Bendigo and Adelaide Bank, was offered to the market last year. The sale price reflects a market equated yield of 6.25%. In August, Charter Hall Long Wale REIT divested a 50% stake in 12-26 Franklin Street to Charter Hall Prime Office Fund for $135 million on a reported yield of 5.79%. The 17-level tower was constructed in 2012 with a precommitment from the Australian Taxation Office with a WALE (by income) of 8.8 years. Australian Prime Property Fund Commercial (APPF), a core wholesale unlisted property trust managed by Lendlease, sold 60 Flinders Street for $101.35 million in August. The 13-storey tower has been occupied by Santos since the since construction in 2007 and is one of two towers built following pre-commitment from Santos and IAG. 60 Flinders Street has been acquired by a private Victorian investor on an initial yield of 7.54%. The yield differential between Adelaide and the Eastern Seaboard markets is between 200 and 250 basis points. On a capital value basis, the average premium to purchase an A grade asset in Sydney costs more than $15,000 per square metre. The differential between Adelaide and the eastern seaboard, Sydney especially, represents attractive counter-cyclical opportunities for investors and recent demand from both domestic and offshore capital is indicative of this trend. Sales Activity by Price (> $5 million) - Adelaide CBD $900m $5m - $50m $50m - $100m >$100m $800m $700m $600m $500m $400m $300m $200m $100m $0m Vendor & Purchaser Type (> $5 million) - Adelaide CBD Purchasers Yield Spread to Bond & IRR Adelaide CBD 12% 12% 10% 8% 6% 4% 2% Vendors % 0% 20% 40% 60% 80% 100% Fund Trust Developer Owner Occupier Government Syndicate Foreign Investor Private Investor Other Source: RBA / Savills Research 10yr 10yr Bond Bond Rate Rate Average Average Adelaide Adelaide CBD CBD (Grade (Grade A A Yield) Yield) Average Adelaide CBD CBD (Grade (Grade A A IRR) IRR) savills.com.au/research 6
Market yields in the Adelaide CBD, as at June 2018, are estimated to range between 6.05 and 7.25% for Premium buildings, and between 6.75% and 7.75% for A grade buildings. The average yield for A grade office buildings in the quarter to is 7.25%, representing a 25 basis point tightening over the year. There are recent examples of Prime assets trading on 6.25% and 6.50%, well above what is being achieved on similar assets in Sydney or Melbourne. The wide yield spread between the markets does suggest that there is scope for further compression to occur here. Capital values in the Adelaide CBD, as at, are estimated to range from $4,125 per square metre to $5,850 per square metre for A grade buildings, and between $2,500 per square metre and $4,000 per square metre for Secondary grade (B grade) buildings. Capital Value ($/sq m) vs. Market Yield 6,000 5,000 4,000 3,000 2,000 1,000 Capital Value - ADL CBD Market Yield (RHS) 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% Recent Notable Sales (by Sale Price) Property Price ($m) Date NLA Yield Type $/sq m 11 Waymouth St (ANZ House), Adelaide 202.50 Dec-17 30,997 6.57 e 6,533 80 Grenfell St, Adelaide 184.60 May-18 22,691 6.25 e 8,135 12-26 Franklin St, Adelaide (50.0%) 135.00 Aug-18 37,316 5.79 r 7,236 60 Flinders St, Adelaide 101.35 Aug-18 15,731 7.40 i 6,443 60 Light Sq, Adelaide 35.00 May-18 6,644 6.77 e 5,268 27-39 Currie St, Adelaide 26.00 Jun-18 14,062 3.85 r 1,849 51 Pirie St, Adelaide 14.50 Jul-18 4,252 n.a n.a 3,410 ; Yield Types: i = Initial, r = Reported, e = Equated, v = Vacant, dev = development; *Part of portfolio sale savills.com.au/research 7
Supply Development plans have been revived for a 21-storey commercial office tower at 42-56 Franklin Street, following a new development application to develop the site including circa 21,000 square metres of office space. Last year, developer Commercial & General announced a joint venture with Le Cordon Bleu to redevelop 200 North Terrace, with the building proposed to house the new headquarters of the culinary institute. The redevelopment has been approved and could commence early next year. Works on Stage 2 (the larger tower) of Charter Hall s staged redevelopment of the existing GPO and Telephone exchange buildings began late last year following the precommitment to Attorney-General's Department. In April, BHP, who has been weighing up relocation options for about three years, announced that it will be relocating its Adelaide headquarters over eight floors in the new tower. BHP has also secured naming rights. The two lease precommitments in the larger tower (Stage 2) of redevelopment brings the occupancy level to at least 90%. The project is on target for completion by Q3-2019. Net Supply by Year (square metres) 100,000 Historic Net Additions Savills Forecast 15yr Avg 80,000 60,000 40,000 20,000 - (20,000) Source: PCA / Savills Research In August, it was reported that the GPO building on the corner of King William and Franklin Streets had been sold to Greaton Group (led by Nicho Teng). The GPO building will be redeveloped as part of the 15-storey tower development to accommodate a new 285 room Westin Hotel (Marriott International). Walker Corporation and the State Government $610 million Festival Plaza (Riverbank) project received approval in November 2016. While no firm timing on start date has been provided, completion is not likely until after 2021. A 19-storey mixed-use building is under construction on the site of the old Maughan Church. Expected to comprise up to 6,500 square metres of office, the development is due to be completed later this year. Earlier this year, CBUS acquired the former Planet nightclub site at 73-85 Pirie Street from Adelaide Development Company (ADC) reportedly for circa $18.5 million. Plans for the site to be developed have been proposed since 2006, with the last development approval for an 18-storey tower lapsing in 2012. However, ADC received development approval in March 2018 for a 21-storey, circa 30,000 square metre office tower and sold the site off-market to CBUS. Pending pre-commitment, the development is proposed to begin construction next year. savills.com.au/research 8
MONTEFIORE ST EAST TERRACE PULTENEY ST KING WILLIAM ST FROME ST WEST TERRACE EAST TERRACE PULTENEY ST KING WILLIAM ST EAST TERRACE UNLEY RD Savills Research Briefing Notes Adelaide Office Development LEGEND PORT RD Adelaide Core 5 KING WILLIAM RD NORTH TERRACE 7 3 Adelaide Frame Adelaide Fringe GLOVER AVE HINDLEY ST HINDLEY ST RUNDLE MALL RUNDLE ST RUNDLE RD CURRIE ST CURRIE ST GRENFELL ST WAYMOUTH ST WAYMOUTH ST PIRIE ST PIRIE ST BARTELS RD 6 1 FRANKLIN ST FRANKLIN ST 2 4 FLINDERS ST SIR DONALD BRADMAN DR GROTE ST GOUGER ST GOUGER ST ANGAS ST WAKEFIELD ST WAKEFIELD RD ANGAS ST ADELAIDE MORPHETT ST MORPHETT ST WRIGHT ST WRIGHT ST 8 CARRINGTON ST CARRINGTON ST STURT ST STURT ST HALIFAX ST GILBERT ST GILBERT ST GILES ST GILES ST SOUTH TERRACE ANZAC HWY SIR LEWIS COHEN AVE GOODWOOD RD PEACOCK RD GLEN OSMOND ROAD HUTT ST HUTT RD The table below details the major upcoming and planned development projects in the Adelaide CBD. Building Address Dev Stage NLA Exp. Comp Precinct Tenants 1 2 3 4 5 6 7 Cnr Pitt & Franklin St UC ~6,500 2018 Core Precinct GPO, Tower 2 UC 24,690 2019 Core Attorney-General s Department 203 North Tce PS ~1,360 2020+ Core Precinct GPO, Tower 1 PA 15,307 2020+ Core Festival Plaza Building PA 40,000 2021+ Core 42-56 Franklin St PS 21,000 2021+ Core 200 North Tce (12-20 Gawler Pl) PA 25,635 2021+ Core Le Cordon Bleu 8 322 King William St PA 11,550 2022 Frame ; UC = Under Construction, EP = Early Planning, PS = Plans Submitted, PA = Plans Approved, DA = Development Approved savills.com.au/research 9
Rents As at, net face rents in Adelaide CBD typically range from $405 to $475 per square metre per annum for Premium grade, $330 to $410 per square metre per annum for A grade and $265 to $335 per square metre per annum for B grade. As at, net effective rents typically range from $250 to $300 per square metre per annum for Premium, and between $185 and $235 per square metre per annum for A grade. In the Fringe, net face rents in Adelaide Fringe typically range from $330 to $355 per square metre per annum for A grade and $270 to $300 per square metre per annum for B grade. There has been no change in the year to. Similar to CBD trends, incentive levels do vary by building grade, with A grade buildings. Net Face Rents by Grade ($/sq m) 500 Premium Grade A Grade B ADL Fringe (Grade A) 450 400 350 300 250 200 Net Face & Net Effective Rents as at Sep-18 ($/sq m) 500 450 400 350 300 250 200 150 100 50 - Net Face Rent Net Effective Rent Net Incentive % - rhs 440 370 300 275 210 165 Premium Grade A Grade B 36 35 34 33 32 31 30 29 28 27 Outlook There are strong signs of a recovery in the job sector, with the state s job advertisements continuing their upward trend and while this is yet to translate into significant take-up of office space in the CBD, it bodes well for improvements in actual job numbers and a continuation of positive net absorption over the next 12 months. There have been a number of economic metrics that have constrained tenant decision making over the last nine months, including the state election and the last stage of abolishing stamp duty cuts for non-residential property transfers being finalised. On that note, there are a number of green shoots emerging that will begin to benefit office take-up in the CBD, defence announcements being key, as well as general public infrastructure investment that is underway. These industries bode well for take-up of engineering or project space in the short-term. Expect to start to see a shift in the technical vacancy rate in the second half of the year. The repositioning of Secondary space, as more owners undertake internal upgrades, typically on a floor-by-floor basis, has certainly helped drive the flight to quality and increased absorption of space during the last 12 months, as well as close that gap between Prime and Secondary. Expect a continuation of this trend in the short-term. Yield compression is still evident, suggesting that there is still scope for further compression in this cycle. Investors, mostly off-shore groups, have been prominent recently, however expect greater competition from local private investors and syndicators seeking to acquire assets to value-add and reposition. savills.com.au/research 10
Appendix - Adelaide Fringe PCA Summary Table Adelaide Fringe (as at Jun-18) Prime Secondary Total AUS CBD Total Stock ( 000) 40.7 176.6 217.2 7,256.4 Total Vacancy ( 000) 3.4 20.5 23.9 650.2 Vacancy (%) 8.4 (5.8) 11.6 (8.3) 11.0 (7.8) 9.0 (9.2) Net Absorption ( 000) 1.0 (1.9) -1.8 (-1.7) -.8 (.2) 29.9 (48.1) Net Absorption (%)* 2.8 (7.6) -1.1 (-1.1) -0.4 (0.1) 0.5 (0.8) Net Additions ( 000) 1.4 (2.3).0 (-.2) 1.4 (2.1) -10.6 (73.5) - Stock Additions ( 000) 1.4.9 2.2 154.1 - Stock Withdrawals ( 000) 0.0 0.0 0.9 164.7 Net Additions (%)** 3.5 (8.5) 0.0 (-0.1) 0.6 (1.0) -0.1 (1.1) Top Leases Adelaide Fringe (over the year to Sep-18) Tenant Property Date NLA Type Rent Term 162-163 Greenhill Rd, Parkside Metricon Sep-18 1,400 Direct n.a n.a. 84-86 Greenhill Rd, Wayville Undisclosed Oct-17 604 Direct 310 (Net) 7 67 Greenhill Rd, Wayville Rubicor Workforce May-18 378 Direct 400 (Gross) 5 Leasing Types: p = Pre-commitment, d = Direct, s = Sub-Lease, r = Renewal Top Sales Adelaide Fringe (over the year to Sep-18) Property Price ($m) Date NLA Yield Type $/sq m 257 Fullarton Rd, Parkside 13.50 Sep-17 2,381 5.85 r 5,670 191-192 Fullarton Rd, Dulwich 9.43 Feb-17 2,325 7.61 r 4,054 9-11 Dequetteville Tce, Kent Town 6.00 Oct-17 2,207 n.a v 2,719 22 Greenhill Rd, Wayville 4.66 Dec-17 1,263 6.64 e 3,689 i = Initial, r = Reported, e = Equated, v = Vacant, dev = development savills.com.au/research 11
Adelaide Office Key Indicators (Q3-18) Premium (CBD) A Grade (CBD) B Grade (CBD) A Grade (Fringe) Low High Low High Low High Low High Rental Gross Face ($/sq m) 520 590 445 530 355 435 400 425 Rental Net Face ($/sq m) 405 475 330 410 265 335 330 355 Incentive Level Net 25 35 28 38 30 40 20 30 Rental Net Effective ($/sq m) 250 300 185 235 140 185 250 265 Outgoings Operating ($/sq m) 65 75 55 70 40 55 40 50 Outgoings Statutory ($/sq m) 40 50 40 45 40 45 20 30 Outgoings Total ($/sq m) 105 125 95 115 80 100 60 80 Typical Lease Term 7 10 5 10 3 7 5 7 Yield Market (% Net Face Rental) 6.00 7.25 6.75 7.75 8.00 9.25 7.25 7.75 IRR (%) 7.25 7.75 7.75 8.75 8.50 9.75 8.00 9.25 Cars Permanent Reserved ($/pcm) 380 450 350 410 300 350 90 120 Cars Permanent ($/pcm) 370 450 350 400 300 350 90 120 Office Capital Values ($/sq m) 5,250 7,750 4,125 5,850 2,500 4,000 4,125 4,725 NB: All rents equivalent to whole floor mid-rise; ^Net Incentive Key State Contacts Valuations Heath Dowling +61 (0) 8 8237 5039 hdowling@savills.com.au City & Metropolitan Sales Steve Bobridge +61 (0) 8 8237 5015 sbobridge@savills.com.au Office Leasing Adam Hartley +61 (0) 8 8237 5043 ahartley@savills.com.au Asset Management Jeffrey Klaebe +61 (0) 8 8237 5018 jklaebe@savills.com.au Capital Transactions Peter Isaksson +61 (0) 8 8237 5020 pisaksson@savills.com.au Project Management Steve Christodoulou +61 (0) 8 8237 5004 schristodoulou@savills.com.au The Savills Research & Consultancy team has years of experience, and is supported by our extensive agency, property management and valuation professionals. For national-level consultancy or subscription requirements please contact: Capital Strategy & Research Shrabastee Mallik +61 (0) 2 8215 8856 smallik@savills.com.au Savills is a leading global property service provider listed on the London Stock Exchange. Trusted since 1855, we have extensive experience across the Asia Pacific, with over 50 offices, and in Australia, we have over 800 staff focused on meeting all your property needs. This information is general information only and is subject to change without notice. No representations or warranties of any nature whatsoever are given, intended or implied. Savills will not be liable for any omissions or errors. Savills will not be liable, including for negligence, for any direct, indirect, special, incidental or consequential losses or damages arising out of our in any way connected with use of any of this information. This information does not form part of or constitute an offer or contract. You should rely on your own enquiries about the accuracy of any information or materials. All images are only for illustrative purposes. This information must not be copied, reproduced or distributed without the prior written consent of Savills. savills.com.au/research 12