Article from the Australian website:
US crisis shock waves hit local leasing
Bridget Carter | September 18, 2008
FINANCIAL giants Babcock & Brown, failed New York investment bank Lehman Brothers and a number of other tenants are understood to be attempting to offload up to 10 floors of office space in Australia's most expensive skyscrapers as the global credit crisis continues to cause shock waves through financial markets.
Stricken investment bank Babcock & Brown has unofficially placed the three floors it had for expansion, out of the 10 levels it occupied at Sydney's Chifley Tower, up for sub-lease.
At Sydney's Governor Phillip Tower, three floors that housed about 130 staff of failed finance firm Lehman Brothers is also anticipated to be up for grabs.
That follows the Wall Street giant's bankruptcy filing this week, although the building's owner GPT Group said that for now it was "business as usual" for staff there.
Tenants of the 54-floor Governor Phillip Tower complex on Farrer Place include a number of parties burnt by the global credit crisis, including Citigroup and Merrill Lynch, which occupies about 5000sqm.
Tricom and Octaviar also had their offices there.
Collectively, more than 13,000sqm of premium office space is on the market in Sydney's central business district on the back of the sub-prime fallout.
Premium office space in a tower such as Governor Phillip rents at up to $1000 per square metre per annum and last year was strongly sought after.
But now, industry insiders question whether the owners will find parties willing to pay full price, with more space expected to come up for lease if financial giants suffer further and axe more workers.
ING Office Fund chief executive Tino Tanfara said vacancy rates in Sydney for office space rose slightly in the past month to 4.3 per cent across all classes.
He predicted "rent holidays" would be offered to fill the space by the financial firms.
"Premium (office space) is still pretty tight, but demand has really slowed a lot and tenants have been more prone to stay in the buildings," Mr Tanfara said. "I think lease rates will drop because the owners will want to lease it out quickly.
"If they really cut those rents that will have ramifications across the board."
Cameron Williams, NSW director of office and retail leasing for Colliers International, said Lehman Brothers moved into two Governor Phillip Tower floors about a year ago.
A third floor was added for expansion, but attempts to sublease that space had been unsuccessful.
"From the start they put that floor on the market," he said.
Mr Williams said the fallout from the announcements out of the US this week "remains to be seen".
"It may become direct space on the market through the owners," he said.
Rent generated from Lehman would be about $3 million a year, he said.
The building's part owner, GPT Group, is trying to sell assets to drive down debt.
Dexus Property Group owns a half share of the building, while the Lend Lease fund APPF owns the remainder.
The parties should be able to cover rent for up to a year with money that should have been placed in a trust, to be used if the firm struck trouble.
"It comes down to GPT's ability to re-let the premises in the time frame," Mr Williams said.
Meanwhile, the space offered by Babcock and Brown in the nearby 42-floor Chifley Tower, on the corner of Hunter and Phillip Streets, had been on offer for two weeks, Mr Williams said.
"That is informally on the market at the moment to sublease," he said.
Other parties understood to be sub-leasing space include administrator-run firm Octaviar, based in the Governor Macquarie Tower arm of the complex, Citigroup, Bank of America and Challenger Financial Services Group.
The debt-ridden Allco Finance Group is also understood to be offloading space at the Gateway Building at Macquarie Place after already sub-leasing part of its office to logistics giant Brambles.