Singapore’s OUE REIT Adds to Sydney Office Rebound with $252M Salesforce Tower Deal

Sydney’s rebounding office market continues to attract commitments from institutional investors, with Singapore’s OUE REIT on Tuesday announcing an agreement to purchase a 19.9 percent stake in the city’s Salesforce Tower.

The SGX-listed trust will be acquiring its slice of the city’s tallest commercial tower at a value of A$357.2 million ($252 million), according to a statement to the stock exchange, including cash consideration of A$195.5 million, plus assumption of debt. 

OUE REIT had announced last month that it was in exclusive talks to purchase a stake in the office project at 180 George Street on Circular Quay from Mitsubishi Estate. In its statement on Tuesday, Han Khim Siew, chief executive of OUE REIT’s manager, positioned the investment as a bet on both the Australian economy and Sydney’s growth potential. 

“Looking ahead, Australia offers a stable economic outlook, supported by strong capital investment flows and resilient demand drivers,” Han said. “In Sydney, favourable demographic tailwinds and proactive government planning are expected to further drive long-term office demand.” 

Fully Occupied in Central Sydney

With the Salesforce Tower’s 61,914 square metres (666,437 square feet) of net lettable area 99.2 percent occupied as of the end of December, OUE REIT is paying the equivalent of just over A$28,991 per square metre for its first asset in Australia, with the deal coming after the company sold its sole mainland China property at a loss at the end of 2024. 

Completed in 2022, the Foster and Partners-designed skyscraper is home to corporate tenants including Bain & Company, Accenture, TikTok and JLL, in addition to the software giant that put its name on the tower’s top floors. The transaction values the Saleforce Tower at just over A$1.79 billion.

The weighted average term to lease expiry in the tower, based on gross rental income, is 5.5 years, with 59,977 square metres of the tower’s lettable area dedicated to office space, while the remainder houses retail amenities. 

The project has all the certifications which appeal to publicly listed REITs, having scored 6 stars on the Green Star rating system of the Green Building Council of Australia and certified as Platinum under the WELL regime for healthy workplaces. 

Despite the Salesforce Tower investment giving it entry to a new market, OUE REIT’s leadership indicated that its focus remains on its home environment. 

“While expanding our footprint into Sydney, Singapore will remain our core market, accounting for approximately 94.9 percent of our portfolio value post-acquisition,” OUE REIT’s Han said. “We will also continue to explore opportunities to further enhance our portfolio through disciplined capital allocation, with a goal to deliver sustainable long-term growth for our unitholders.”

Recovering Market Opens Exits

OUE REIT’s investment allows Mitsubishi Estate to fully exit an investment it had made in the Lendlease-developed project in 2016. Mitsubishi Estate had originally taken a 30 percent share of the tower, before selling a 10 percent stake to Japan’s Odakyu Electric Railway for an undisclosed sum in March of last year. 

Lendlease retains a 20 percent interest in the building, while the largest stakeholder, Ping An Real Estate, owns 50 percent of the property. The Chinese insurance giant has been shopping its investment in the Salesforce Tower to potential buyers for some time, after having seen efforts to exit the project in early 2023 fizzle.

Despite Ping An’s struggles, the market for Sydney desk space has improved in recent months, with data from MSCI Real Assets showing trades of income earning office properties across Australia having jumped to A$4.7 billion in the fourth quarter – up 122 percent from a year earlier.

That fourth quarter total was helped along by deals such as Blackstone’s sale of a 75 percent stake in the Grosvenor Place office tower on George Street in Sydney to Commonwealth Superannuation Corporation and fund manager GPT Group in October in an A$1.29 billion deal.

The transactions have continued this year, with Singapore’s Mapletree Investments in January selling a suburban Sydney office block to local fund manager Growthpoint Properties for just over A$101 million. During this month the Abu Dhabi Investment Authority announced that it had sold its 50 percent stake in a Sydney office precinct to Australian fund manager Charter Hall, with market sources tagging that deal at A$500 million. 

Last week North American fund manager BGO agreed to purchase 100 Mount Street in North Sydney from entities controlled by fund manager Dexus for A$558 million ($394.7 million), while up the road, Singapore developer Soilbuild acquired a 25 percent stake 40 Mount Street from M&G Real Estate for A$90.7 million.