Our business strategy is to grow our investment and development programme to over A$2bn by 2012. We therefore increased our development activity across the commercial sector in Australia’s major cities.
Pivotal to the strategy is the development of ‘green’ office buildings for a property market characterised by strong economic growth and increasing community support for sustainability initiatives.
In 2007, we celebrated 40 years of operation in Australia; a significant milestone. The 24.8% return on capital we achieved reflects a combination of rental income, trading profits and revaluation uplifts resulting from our selective portfolio, based on local knowledge and understanding of Australian cities.
Working towards having 45% of our total capital in development, we were particularly active in the office market. Tenant demand for office space reflected a strong economy and a growing service sector, coupled with a low supply of grade A buildings in most office markets.
In Sydney, we completed a 11,000m2 speculative office development – 25 Smith Street, Parramatta. Two months prior to completion, IAG, a major insurance group, committed to lease the entire office component – 97% of the building.
We commenced 400 George Street, Brisbane, a 43,000m2 speculative office development. This will be one of the new generation of environmentally sustainable buildings in Brisbane’s central business district, with a five-star Green Star rating for office design. It is already 30% pre-committed, with completion expected in mid 2009.
Plans for another Green Star-rated office building are already underway, following the purchase of a 3,225m2 site at 60 Station Street in Parramatta, Sydney. We expect to commence construction mid 2008.
All three developments have been with our joint venture partner, Leighton Properties.
Our in-house asset managers performed well, achieving significant increases in rental income and an average occupancy level of 97%. We adjusted our investment portfolio by selling the Flinders Street car park, Melbourne, and our Nelson Bay serviced apartments, north of Sydney.
Phillip Dowling, Director of Asset Management, retired after almost 20 years with Grosvenor, and we thank Phillip for his valuable contribution to our business.
Despite the weakness in key international markets at the end of 2007, the Australian economy enjoys the benefits of increasing trade links with China and India and the outlook for Australian property remains relatively positive. Consequently we will continue to develop office buildings and will move progressively into other sectors, including residential.
© Grosvenor 2008