26 Nov 2016

Spencer Street turns into crime-fighting precinct

Spencer Street is set to become the crime-fighting centre of Melbourne with the state government agreeing leasing terms for a major new office tower next to the current City West police headquarters.

The Andrews government is expected within weeks to ratify a deal that will see super fund-backed developer Cbus Property deliver a new tower to house three elite law enforcement units.

Cbus owns a site at 311 Spencer Street in conjunction with Australia Post where it will build the multi-storey complex to house 65,000 square metres of gross leasing area.

Final details of the agreement were hammered out in late October, industry sources say.

The proposed building on Australia Post’s old city mail sorting exchange is next door to the fortified $240 million City West Police Complex that Cbus built for Victoria’s police force.

A large contingent of police personnel is expected to move into the building when the lease expires in 2020 at the World Trade Centre complex in Flinders Street.

They will be joined by the Australian Federal Police, who are moving out of a building at 383 La Trobe Street where Planning Minister Richard Wynne this week gave approval for a 70-level apartment skyscraper.

Some floors in the new police building will be devoted to the Australian Crime Commission, which currently occupies a Dexus-owned office at 452 Flinders Street.

The amalgamation of the high-profile list of A-grade government tenants into one office tower will make it a highly sought after asset if Cbus decides to offload the building, or a portion of it, to fund the development.

The strong interest shown in Australian office assets this year – Savills Australia’s latest research estimates foreign investors snapped up 57 per cent of CBD sales around the country this year – is expected to continue.

“The demand is still there. Superannuation money, and there’s lots of it, has to get reinvested somewhere, add private money and other institutional funds, and you have a strong and growing domestic pool of capital, let alone the billions in foreign money likely to continue to seek Australian property,” Savills head of research Tony Crabb said.

Investors spent $12 billion buying offices across Sydney and Melbourne over 12 months to September.

The largest downside risk expected next year is a potential lack of assets to sell, he said.

“It’s really a matter of supply. Will owners want to sell? What will they buy instead?  Will new construction be enough to meet any supply shortfall? What we do know is that while demand may outstrip supply we are in for another 12 months of very strong investment,” Mr Crabb said.

Cbus is understood to have a deal in place with Australia Post to buy its stake. It sold a half share in the City West complex soon after developing it to global funds giant Invesco for close to $120 million.

The new police complex will also be a close neighbour of the Melbourne Assessment Prison further up the street. Its construction will turn the western end of the city into a major law enforcement strip.

Cbus pitched the building to the state in a “market led proposal” that would co-locate and consolidate Victoria police’s operations in “one stand-alone precinct”.

The City West complex will be joined to the new structure by walkways and landscaping, designs by Woods Bagot architects show.

Cbus is one of Melbourne’s most active developers.

The super fund will begin work in September on its landmark $1.25 billion “pantscraper” project at 447 Collins Street after signing top tier legal firm King & Wood Mallesons as its first anchor tenant.

It is also putting the finishing touches to a ritzy $350 million 45-storey apartment tower at 35 Spring Street where it topped out development in August.

Cbus was contacted for comment. A spokesman for the Treasury department said the proposal was under consideration.

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