Hines has acquired a prime site in central Melbourne – reportedly for about A$200m (€124m) – for its largest development yet in Australia.

The Houston-based global real estate developer and fund manager bought the site from Chinese-backed Landream, which had planned a luxury hotel and apartments on at 600 Collins Street, at the western fringe of Melbourne’s central business district (CBD).

David Warneford, Hines’s managing director and country head of Australia, told IPE Real Assets: “We are planning to build a premium office tower with more than 60,000sqm of space on the site.”

Warneford declined to “talk numbers”, but industry sources said the completed tower would be worth at least A$1bn.

Work will start in the next couple of years to allow existing leases to expire, redesign the project and seek approval.

Warneford described the site as the “final piece of the puzzle” to complete regeneration of a part of the Melbourne CBD that has attracted major property players such as Investa and Charter Hall Group.

He said Hines regarded Melbourne as a good long-term investment destination despite short-term headwinds. The fundamentals that supported the city in the past 10 years would return, he said.

Asked about the impact of the COVID-19 pandemic on the future of office, Warneford said: “We speak to our tenants globally. Some will tell us that, over time, they may reduce the space they now occupy.

“Equally, other tenants view office as critical business infrastructure, in terms of corporate brand, to attract employees and to foster a corporate culture.

“In the context of whether you need office space for every function you perform, you probably don’t, so what you are trying to achieve with the office is to have a place to foster creativity and collaboration in an attractive environment.

“As a company that has been developing office over the past 60 years, our perspective is that there will be a flight to quality.”

Warneford told IPE Real Assets: “We think now is a great time to be a developer. We have the opportunity to adapt and to respond to the market. Over the next couple of years it will become clearer what is needed from an office, and what is important from a health perspective.”

He said it would be easier to incorporate the required features into a new project rather than trying to retrofit a 30-year-old building to keep up with the times and demand of tenants.

Warneford said Hines had pivoted to a development strategy in Australia after selling a portfolio of offices to Centuria for A$645m in 2018. “We felt there were better opportunities in the development space,” he said.

Hines has two smaller projects in Melbourne. It is due to start work on an 18,000sqm creative office project in the inner Melbourne suburb of Collingwood, and is currently finalising plans for a 5,000sqm project in nearby Richmond, to cater for small-to-medium-size companies.