Melbourne CBD Office Tower Sale Defies Current Economic Conditions

Colliers International is pleased to announce the sale of 200 Victoria Street in Melbourne to Sydney-based investment manager Realmont Property Partners on behalf of 200 VS Pty Ltd, which is effectively owned by Japanese domiciled NTT Urban Development Corporation and subsidiary of Fortune 500 company Nippon Telegraph & Telephone Corporation (NTT).  

The sale price of $72,000,000 reflects an initial yield of 4.92% and a capital value of $9,100/sqm.

The property comprises a high quality modern A Grade office tower 67% leased to the State Government on behalf of the Environmental Protection Authority Victoria and 29% leased to Trinity College, Melbourne University’s oldest college.  The building was completed in 2008 and is one of the most sustainable in Melbourne being just one of only three to achieve a 6.0 Star Green Star rating and 5.5 Star NABERS Energy rating1.

Trent Preece, Director and Head of Capital Markets in Melbourne for Colliers International, brokered the transaction off-market on behalf of the Australian Unity Diversified Property Fund, who purchased the building from Colliers International for $42,300,000 in October 2014.

“The Melbourne office market continues to draw significant domestic and offshore capital given exceptionally strong underlying fundamentals, including record low vacancy rates, limited land supply, population growth and record levels of infrastructure investment.  There is an enormous amount of confidence in the Melbourne office market and its ability to recover quickly from COVID-19,” said Mr Preece.

“The sale of 200 Victoria Street is an outstanding result for both Vendor and Purchaser during challenging economic conditions.  The location offers some of the greatest growth prospects in the CBD with high exposure to Melbourne’s world class health and education sectors and over $50 billion in major infrastructure projects.  200 Victoria Street will capitalise on the Metro Tunnel Rail Project, including the future State Library and Parkville stations and direct underground pedestrian link to Melbourne Central station, the rapidly growing Melbourne Biomedical Precinct and central position between Melbourne University and RMIT.

“Despite the short-term market challenges, highly experienced and cashed-up investors continue to actively seek quality investments underpinned by income security and strong future growth prospects.  Buyers taking advantage of opportunities in the current climate will enjoy the success of the Melbourne office market over the years to come.”

From a health perspective, the Melbourne Biomedical Precinct is Australia’s No. 1 medical precinct and ranked 4th globally2.  The precinct located in the norther fringe of the Melbourne CBD is made up of over 40 major institutions including hospitals, medical research & biotech facilities and universities who employ over 50,000 people3.  Recently, Australia’s largest public company and global biotech giant CSL pre-committed to over 36,000sqm in Stage 2 of PDG’s Elizabeth North development on the former Toyota Car Dealership along Elizabeth Street.

While from an education perspective, Melbourne is Australia’s No. 1 student city and ranked 3rd globally behind Tokyo and London4.  Pre COVID-19, education was the State’s largest services export with circa 300,000 international students growing at an average of 13% per annum.

Will Doherty, Head of Property from Realmont Property Partners said, “it is pleasing to identify and complete the acquisition of a quality Melbourne office asset for a highly respected partner of our firm.”

The acquisition is NTT’s second major commercial investment in Australia having purchased a 50% interest in 121 Marcus Clarke Street in Canberra for $100 million in March 2019 also through Realmont Property Partners.

Sources:
1. Green Building Council Australia
2. NDF Research
3. Melbourne Biomedical Precinct
4. Quacquarelli Symonds Best Student Cities Ranking 2019

 


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Trent Preece

Director | Capital Markets

Melbourne CBD

Trent has over 13 years’ experience in property, largely providing investment advice on major Melbourne CBD and metropolitan office assets for a wide range of local and offshore listed real estate investment trusts, wholesale investment funds, superannuation funds and offshore sovereign wealth funds.

Trent is widely regarded as an expert in the Melbourne CBD and metropolitan office markets. His valuations background has provided an exceptionally high level of market and asset specific knowledge, together with strong technical expertise.

Trent has significant transaction experience having advised purchasers on $4b in acquisitions during 2016 and 2017.

More recently, Trent has transacted the following major sales:

- Bendigo Bank Building, 120 Harbour Esplanade, Melbourne. Sold to Marprop Real Estate Partners on behalf of an offshore institutional client for circa $81 million.

- MYOB Building, Cremorne, Melbourne. A major fund-through transaction sold to AXA Investment Managers on behalf of HESTA for $100.1 million.

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