Colliers International sells prime office building in Hawthorn East on six-per-cent yield
The Bunnings Group’s national headquarters has sold to a local private syndicate for $24.7million.
Colliers International’s Peter Bremner and Rob Joyes negotiated the sale of the Australian household hardware chain’s head office building at 16-18 Cato Street, Hawthorn East, on a yield of six per cent.
Bunnings will continue to operate from the A-grade office asset, having commenced another six-year lease in August, with an additional six-year option to renew.
Mr Bremner said the buyer recognised the property, which has a net lettable area of 5295sqm, as an “outstanding” opportunity to secure strong-performing real estate with a solid income stream in a prime location.
“Bunnings is Australia’s largest private employer and largest company in terms of revenue and has been a long-term tenant since the building was specifically constructed in 2004,” he said.
“The building offered a predictable and secure cash flow stream until at least August 2022, as it continues to be Bunnings’ national headquarters, plus significant future rent reversion in a thriving inner-east suburban location.”
The off-market campaign achieved a quick turn-around, selling to a local private syndicate within two weeks of the first inspection.
“We only put it to four parties off market and conducted inspections with three of those parties,” Mr Bremner said.
“A really quick off-market sale such as this demonstrates that we know who the most active buyers are at any time, who can perform quickly and unconditionally and are not subject to any due diligence.”
Mr Joyes said the inner-east office precinct continued to out-perform alternative commercial precincts due to the lack of forecast new supply, which had been underpinning several years of net effective rental growth exceeding 10 per cent per annum.
“Strong rental growth coupled with consistent yield compression is delivering some handsome windfalls to many inner-east and city-fringe commercial investors,” he said.
“The inner-east vacancy rate has decreased significantly to 4.15 per cent from 6.2 per cent last year. Hawthorn specifically has a current vacancy rate of 4.6 per cent and the expectation is that this will continue as tenant demand increases, driven by stronger economic improvement.”