This article is from the Australian Property Journal archive
333 Queen Street has sold for around $35 million in the largest Melbourne CBD office transaction of the year, indicating growing confidence in the market.
Built in 1986, the seven-storey commercial office building sits within close proximity to the city’s legal precinct on the corner of La Trobe Street, boasts 6,000sqm of net lettable area and occupies a 1,028sqm site.
The asset is 85% leased to nine tenants with a short WALE, with a fully let net income of $1,980,000 per annum and significant rental reversion potential.
Nick Peden, Josh Rutman, Tim Carr and Mingxuan Li from JLL’s Melbourne CBD sales team managed the sale via an expressions of interest campaign on behalf of a private family who held the property for 23 years.
“Although the headlines have been negatively swayed on the Melbourne CBD this year, we are witnessing particularly strong interest given the scarcity of opportunity and the obvious long term growth potential,” said Peden, director of capital markets at JLL.
“With international students and CBD pedestrian traffic back to pre-pandemic levels plus an ever-growing Melbourne population, there is a genuinely positive story to tell and buyers are factoring in strong long-term growth for Melbourne”.
The building was snapped up by a local landbanker, after a competitive campaign that brought in interest from a mix of local, interstate, and international parties.
The campaign saw more than 200 buyer enquiries, 36 private inspections and 8 formal offers submitted, with bidders from China, Singapore, Hong Kong, Malaysia and Australia.
“There is no doubt that transaction volumes in the Melbourne CBD are lower than the long-term average, however this most recent deal is evidence of the value that buyers are seeing in well located assets even if they require substantial upgrades,” added Peden.
“In assessing the opportunity, buyers accounted for significant upgrade works to bring the building up to standard and ensure its appeal to current tenant expectations. Sustainability and obsolescence are key pillars for these upgrade works”.
The purchaser is reportedly taking a long-term view of the Melbourne CBD and was drawn to the high-profile corner location of the asset and the future potential.
“We saw over 75% of bids originating from Asian Capital, which is a clear indication of their intent to acquire well located office assets,” said Rutman, executive director and head of capital markets for Victoria at JLL.
“Following a recent JLL trip to Singapore and Hong Kong, it is clear that investors see office as a strategic countercyclical play, particularly for assets with sound fundamentals and large underlying land components”.
“The unconditional nature of the offers and the desire to move quickly are a stark contrast to last year or even early in 2023, where buyer interest was more subdued”.
At the same time, tenants are continuing to choose office locations outside the CBD, with creative construction company McConnell Dowell recenyly signing on to 3,500sqm of Charter Hall’s 480 Swan Street commercial development in Melbourne’s fringe suburb of Richmond.
