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