This article is from the Australian Property Journal archive
MELBOURNE’S CBD has seen its first major freehold property transaction amid the early 2023 commercial real estate slowdown, with a secondary-grade office building changing hands for around $30 million.
However, over 200 buyer enquiries were received from Australia, China, Singapore and Hong Kong during the JLL campaign for 99 Queen Street, with buyers opting to refurbish rather than develop from scratch.
JLL research shows that 46% of tenant briefs are looking for nothing less than an A-grade building, a figure expected to increase throughout 2023. Investors are now looking to secure secondary or B-grade office buildings as opposed to development sites to conduct a refurbishment program in order to capture future tenant demand, according to selling agents Josh Rutman, Nick Peden and Mingxuan Li.
“The prospect of finding an appropriately sized parcel of land has diminished as the CBD has been largely built out. If you couple this with the increasing cost of construction, the alternative of refurbishing older buildings has become the preferred avenue for investors.
“We are in discussions with a number of long-term holders of office assets who are assessing the best avenue for maintaining the value of their properties given the mounting challenges with higher vacancy and increasing holding costs such as land tax.
“Some have looked to partner with groups that have expertise in the repositioning of office buildings to ensure tenant retention and drive better returns. Others have simply elected to offload as demand for these buildings remains robust.”
The successful purchaser was a mainland Chinese investor who is a first-time entrant into the Melbourne CBD market.
The expressions of interest campaign was conducted on behalf of a private family after 17 years of ownership. Thomson Geer’s Eu Ming Lim was the acting solicitor on the transaction.
