This article is from the Australian Property Journal archive
MELBOURNE’S CBD fringe office market along Cremorne and Richmond has seen more activity, with a Hong Kong-based investor snapping up a brand-new seven storey building for $19.5 million.
Positioned close to Richmond railway station and the Swan Street food and nightlife precinct, the seven-storey 45 Wangaratta Street property was recently built by Beams Projects on the former Duchamp clothing site of a mere 368 sqm.
It has ground floor retail and six floors of office space for a total building area of 1,413 sqm.
The sale price translates to a 3.7% yield, building rate of $13,829 per sqm and land rate of $53,100 per sqm, all of which set new pricing benchmarks for the city fringe office investment market, according to selling agents Josh Rutman, Tim Carr and MingXuan Li of JLL.
They said the expressions of interest campaign generated more than 150 qualified enquiries from local private investors, syndicate groups and owner occupiers.
“It’s becoming quite clear that investors are taking a reasonably bullish view on the future of the office, particularly for those assets that are well positioned to capture tenant demand as accommodation needs evolve post pandemic,” Rutman said.
Carr said the fact that the building continued to lease up well during the height of pandemic last year resonated well with buyers given the continued debate about the return to the workplace and what future levels of demand for office space will look like.
“The decentralisation of the workforce from the CBD has led to the inner-city fringe office precinct being in high demand by healthcare, technology and creative industries. Investors are taking great comfort from this trend as office buildings in the city fringe are expected to soak up a great deal of this ongoing tenant demand,” Carr said.
Australia Post became one of the first multibillion corporations to move out of Melbourne’s CBD post-COVID, in favour of the inner suburb of Richmond after agreeing to anchor a new $130 million Charter Hall office complex, and workspace provider Hub Australia will open a new 3,000 sqm offering at Salta Properties and Abacus Property Group’s Industry Lanes development.
Next door to Australia Post’s future HQ, 484 Swan Street, will be home to a $190 million speculative commercial development that will rise 13 stories and bring 17,000 sqm of commercial offices. Clement Lee’s Riverlee is building that in partnership with Bamfa Properties, headed by Adam Agosta.
A connection to Bamfa Nominees has just bought a 2,311 sqm office site at 182-184 Stawell Street in neighbouring Burnley for circa $15 million. Close by, Salta has plans for a $50 million office building at 173-177 Barkly Avenue.
Nearer to the city, Fortis showed it is backing demand for city fringe offices, adding a 1,850 sqm site in Cremorne to its development portfolio with plans for a new $130 million commercial building.
Meanwhile, Li said overseas investor appetite for locations like Richmond has been relatively subdued in recent years, however a number of private Asian groups have started making strong moves toward larger and more substantial acquisitions in the area.
He said Asian investors weren’t familiar with city fringe locations apart from Melbourne CBD when they started investigating Melbourne office building assets, but since then have become more attuned to the nuances of the city fringe office market and “are now aggressively competing with local buyers”.
