Leighton will team with the Parramatta City Council and the university to develop the 14-storey office tower at 169 Macquarie Street, which is part of the new $2 billion Parramatta Square project.

The 26,000-square-metre office development termed 1PSQ will be the preferred site for the new Parramatta central business district campus for 10,000 students.

Leighton Properties managing director Mark Gray said 1PSQ was the first stage of Parramatta Square – a six-stage, three-hectare master plan development by Parramatta City Council. The master plan will potentially include 190,000 square metres of commercial and retail development, more than 500 apartments and 7000 square metres of council facilities including civic administration, a community centre and a library.

''The project at 1PSQ is to be the company's fourth tower development in the area over the past eight years,'' Mr Gray said. ''Developments include multi-award-winning Eclipse Tower at 60 Station Street, 25 Smith Street and 101 George Street.''

The deal comes amid speculation that Stockland and the Singaporean-based City Developments Ltd are in the running to buy Leighton Properties' $7 billion residential and commercial real estate portfolio.

Leighton Properties declined to comment on the speculation.

Included in the portfolio is the Devine Ltd residential assets, which would be attractive to Stockland.