Demand for metro Melbourne strata office soars in 2019

Owner-occupiers driving significant spike in strata sales amidst changing market conditions

Colliers International has seen a significant shift in demand in metropolitan Melbourne as changing market conditions put strata office property in the spotlight.

Owner occupiers form the lion’s share of demand in the suburban market, representing 84%, or two thirds, of all purchasers for all metropolitan office deals Colliers International has concluded year to date,” Colliers International’s Raphael Favas said.

Colliers International alone is currently working with more than 30,000sqm of demand from owner occupiers for strata office opportunities in metropolitan Melbourne. 

“Anecdotally, this is significantly more enquiry than we have fielded in recent years for this kind of office space in the metro market,” Mr Favas said.

Strong interest is also being fielded from owner-occupiers at Ukiyo Commercial, a high end seven-level mixed use development at 101 High Street in Prahran comprising of three 420sqm floorplates.  

The development is being marketed by Mr Favas, Mr Baines and Andrew Ryan on behalf of Chapter Group and is due for completion in Q3 2020, with asking rates of circa $9,250-$9,500/sqm.

“Strong interest interest is being generated by owner occupiers seeking premium, high end finishes all while being within close proximity to amenity,” Mr Favas said.

Owner occupiers have been snapping up strata office assets across metropolitan Melbourne in the first half of 2019. Mr Favas and colleague Jordan Lipton have concluded a series of recent sales, including:
 
- Suite 8, 100 Dover Street, Cremorne: A 165 sqm strata office with high quality internal improvements, located in Melbourne’s ‘silicon valley’, sold for $8,121/sqm. The sale represented a 285% increase in value since being purchased a little over 10 years ago. This capital value increase i consistent with the significant growth experienced in this hot pocket of the City of Yarra.

- Suite 109, 9-11 Claremont Street, South Yarra: A 85 sqm strata office in the Forrest Hill precinct, sold at a rate of $7,058/sqm. 

- Suite 223, 87 Gladstone Street, South Melbourne: A strata office within the ‘Industry Business Hub’ development sold at a rate of $5,816/sqm

- 37,195 Wellington Road, Clayton: A 104 sqm strata office sold at a rate of $3,990/sqm

- 60,195 Wellington Road, Clayton: A 174 sqm strata office sold at a rate of $4,382/sqm

Mr Lipton said demand for strata office in metropolitan Melbourne has been steadily increasing over the last 12 months as a result of the surge of capital rates for similar product in the Melbourne CBD.

Demand has also increased as a result of significant tightening of yields for freestanding office/retail assets in the metropolitan market,” he said. “We are now seeing investors seeking strata office assets as a result of their generous income-producing capabilities with relatively low holding or maintenance costs.

“Developers active in suburban Melbourne are also increasingly turning their attention to commercial and mixed-use projects as they look to diversify beyond traditional residential projects.”
 

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Raphael Favas

Senior Executive | Investment Services

Melbourne East

Raphael is an Executive within the Investment Services team at Colliers International, with a specific focus on the transaction of strata assets throughout Metropolitan Melbourne. Within his role, Raphael works closely with a diverse range of clients including private investors, family offices, high net worth individuals and developers within the Melbourne Middle Markets.

Having obtained a Bachelor of Property & Real Estate (Deakin University), Raphael possesses excellent technical and analytical skills allowing tailored advice to be provided to his clients.

 

 

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Jordan Lipton

Executive | Melbourne Metro Sales

Melbourne East

Jordan specialises in the sale of strata office and retail assets throughout Metropolitan Melbourne and has a genuine passion for helping his clients achieve exceptional results.

Jordan is an enthusiastic and driven member of the investment services team and possesses strong analytical capabilities and uses this skill to derive maximum value from the asset at hand

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