IAG signs up for Grand Central
It has taken the largest corporate pre-commitment in Melbourne's history but the 20-year development saga at the Grand Central site in the CBD finally appears to be over.
Insurance company IAG confirmed yesterday that it had signed a heads of agreement to lease 27,000 square metres in a 43,000 sq m building proposed by superannuation fund CBUS's construction arm, Australian Super Developments.
CBUS has owned the site, at the corner of William and Bourke streets, outright since 2000 and has been searching for a development avenue ever since. The site has an area of about 6400 sq m, takes up almost a quarter of a city block and is arguably the biggest undeveloped property within the city grid.
None of the parties would comment on the value of the leasing deal but property sources said it was the largest pre-commitment by a non-government tenant in Melbourne.
IAG operates in Victoria under the CGU and Swann Insurance brands and has about 2000 employees in Melbourne across four CBD premises.
Insiders said IAG had also considered moving into the second stage of Multiplex's Southern Cross development in Exhibition Street.
ASD has been sweating on a new project, as Ernst & Young House in Flinders Street is scheduled to be finished early next year and Melbourne's construction cycle slows.
ASD chief executive Kevin Fitzpatrick said yesterday the building to be given the address of 538 Bourke Street was the only new CBD tower with commitment to proceed in 2006.
"For the past four years, we have persevered to get this development started to more appropriately address current market needs with environmentally sustainable performance outcomes," he said.
A detailed design had not been finalised but would feature a five-star Green Star ESD rating the first non-government building to achieve such a standard in Melbourne, he said.
The tower should be completed by the end of 2008 and would be part of a redevelopment of the wider site. That redevelopment would probably include a second commercial tower and a public area with mixed retail and food outlets, and possibly a 4.5-star boutique hotel.
It was not clear which buildings at the site would be kept and which would be demolished. Existing buildings include two 14-storey structures, an 11-storey building and a 122-space car park.
The lease was negotiated by Colliers International's Simon Hunt for ASD and Laing+Simmons on behalf of IAG. Mr Hunt refused to comment when contacted by The Australian Financial Review.
The Grand Central site has a chequered history. Lend Lease bought it for more than $100 million at the peak of the property boom last decade but sold it to CBUS, then in joint venture with David Marriner, for only a fifth of that in 1998. CBUS acquired sole ownership in 2000.
Numerous design proposals have come and gone, including one for an 80,000 sq m-plus building.
CGU chief executive Mario Pirone said the decision to invest in new Melbourne premises reflected a long-term commitment to Victoria. "Reducing our CBD offices from four to one will also increase productivity by cutting traffic between buildings and enabling our people to collaborate more effectively," he said.
* IAG will lease 27,000 sq m of a new tower to be built by ASD on the site, in Melbourne's CBD.
* The tower should be completed by the end of 2008.
A deal to save Bourke eyesore
By Helen Westerman
27 September 2005
Big plans: 538 Bourke Street.
ONE of Melbourne CBD's most notorious vacant sites will become the home of Insurance Australia Group following a deal with the site's owners, Australian Super Developments, a subsidiary of industry fund CBUS.
ASD will build a 27-storey building of 43,000 square metres on the site at 538 Bourke Street, on the corner of William Street, after IAG agreed to lease 27,000 sq m. The deal will significantly rejuvenate the western end of the city and is a shot in the arm for the CBD office market, which has had a number of businesses move to Docklands.
IAG, which operates as CGU and Swann Insurance brands in Victoria, will bring together 2000 staff located across four different CBD sites. The building will be branded as CGU.
The site, known as the Grand Central, is made up of the former Jetset building on Bourke Street, a small park and three derelict buildings along William Street, which have been vacant since the mid-1990s. Lend Lease sold the site in 1998 to developer David Marriner's company, Australian Staged Developments, for $20 million. He sold the company to CBUS in 2000, when it was renamed Australian Super Developments.
Among the many mooted developments for the site was a 57-level office tower proposed by Lend Lease in 1991. In 1998, a hotel conversion of the Jetset building was approved, as well as refurbishment of 171 William Street into offices and a restaurant. A small garden was built.
In 2002, the demolition of the William Street buildings was approved for a 27-level building.
ASD chief executive Kevin Fitzpatrick said the rejuvenated precinct was likely to include a second commercial tower, as well as public area with mixed retail, cafe and restaurant outlets and "possibly" a boutique hotel.
The leasing deal will be seen as a boost for the CBD market. ASD is said to have narrowly missed out to Grocon to build AXA Asia Pacific's new headquarters, which opted to move to 800 Collins Street in Docklands. However, it has nearly completed the home of the Ernst & Young Building at the former Herald and Weekly Times Building.
Mr Fitzpatrick said ASD had persevered for four years to tackle market needs, with environmentally sustainable performance outcomes. He said ASD would try to achieve a five-star Green Star rating for the building, the first privately owned building in Melbourne to commit to that level.
pretty ordinary really: