This article is from the Australian Property Journal archive
ACTIVITY in Melbourne’s office market is continuing to ramp up after two pandemic-interrupted years, with super fund REST lobbing a Bourke Street tower home to Nine Entertainment to the market with expectations of about half a billion dollars.
The 17-storey, 43,200 sqm building at 717 Bourke Street is one of only four freehold office buildings in the Melbourne CBD with direct access to Southern Cross station and is opposite Marvel Stadium.
It hits the market soon after GIC bought into an $800 million tower that Charter Hall is building as part of a $1.5 billion project at 555 Collins Street, which came hot on the heels of Charter Hall’s purchase of a half-stake in the $2.1 billion Southern Cross towers in the east end of town.
Closer to 717 Bourke Street, CapitaLand bought 120 Spencer Street – on the other side pf Southern Cross station – for over $320 million on a capitalisation rate of about 5%, and fund manager HThree City spent $236 million to buy 330 Collins Street.
As well as Nine Entertainment, 717 Bourke Street is occupied by major corporates BP, NEC and AIG, and is being offered with a weighted average lease expiry of 4.3 years.
Cushman & Wakefield agents Leigh Melbourne, Nick Rathgeber, Josh Cullen and Mark Hansen have the listing alongside Knight Frank’s Paul Kempton, Trent Preece, Ben Schubert and Neil Brookes, and are expecting $490 million-plus.
The building features A-grade specifications with security concierge, floor-to-ceiling windows, 360-degree views, 382 car park, eight retail units across two levels and a 4.5 Star NABERS Energy Rating.
“The market has changed over the past few months. The pleasing aspect is that it is not a liquidity issue – there is capital, and the change in capital mentality is that it is seeking ‘core plus’ and growth opportunities,” Kempton said.
“This change has stemmed from the inflationary environment and interest rate rises, whereby capital is now seeking high-quality assets with core plus attributes – exactly the profile of 717 Bourke Street.”
Melbourne said Melbourne remains one of the safest destinations for investment as the Australian economy has proven to be one of the world’s leaders throughout the toughest time of the COVID-19 pandemic.
“The GDP contraction of 2020 was one of the lowest in the region, following the reopening of international borders, and the recovery and forecast remains positive,” he said.
Property Council data shows Melbourne’s vacancy rate lifted from 11.9% to 12.9% in the six months to July, largely due to new supply. Office occupancy went backwards last month, from 49% in June to just 38% as workers sought to avoid the Omicron wave and cold and flu season.
Office building sales lifted 7% year-on-year in the June quarter to $5.4 billion across the country, according to MSCI Real Assets, with 4% growth over the first half to $9.6 billion. Melbourne office transactions in the six month period were up 17% to $2.015 billion.
