South Melbourne has become a hive of activity in recent months as investors and developers alike fight to secure space in the evolving precinct.
Colliers International has seen a flurry of activity, with properties being snapped up amidst strong demand as more come to the market.
"Melbourne’s city fringe, and more specifically South Melbourne, has seen considerable capital growth in the past two to five years and as such vendors are seeing this as a window of opportunity to capitalise on favourable selling conditions, where demand continues to outweigh supply,” Colliers International’s Andrew Ryan said.
“South Melbourne is transforming from the once traditional office market into a chic inner city haven for many residents, with older style office buildings being transformed into high density, high end residential apartment sites where end users are attracted to the plethora of public amenity on their doorstep."
In the most recent deal, Mr Ryan and colleague Ted Dwyer have sold a two level office building at 11-21 Buckhurst Street to local developer Alpha14 for $5.5million. The property was sold on a yield of 5.1% and a rate of $7,617/sqm (on land).
“This 953sqm office building offered buyers the comfort of a strong holding income whilst plans and permit were sought,” Mr Ryan said. “The property is surrounded by a range of permitted and under construction residential developments sites which will continue to reshape this pocket of the Melbourne city fringe.
“Ideally positioned within walking distance to Melbourne’s iconic beaches and associated amenity, as well as trendy retail shops, cafes and manicured public gardens, this property appealed to a diverse buying pool.
“The on-market campaign generated interest from local and offshore buyers including developers, passive investors and longer term owner occupiers. The eventual purchaser was a local developer who fought off other buyers in a highly competitive process."
With two street frontages and a land area of 772sqm in a Capital City Zone 1 area under the City of Port Phillip Planning Scheme, Mr Ryan said opportunities such as this with a holding income were hard to come by.
11-21 Buckhurst Street sits within the Montague Urban Village and form a part of the Fishermans Bend Precinct, which is one of Australia’s largest planned urban renewal projects.
Above: 11-21 Buckhurst Street, South Melbourne
The sale comes hot on the heels of a 409sqm office-warehouse at 8 York Street in South Melbourne being snapped up by a private investor for $3.15million. The deal, also negotiated by Mr Ryan, represented a 3% yield and a rate of $7,482/sqm (on land).
“This versatile property offered both an office and warehouse under the one roof, and is currently being utilised as a gymnasium facility,” Mr Ryan said. “This city fringe property ticked all the boxes, offering a holding income of approximately $95,000 per annum, a short-term lease expiry and the flexible zoning of Mixed Use.
8 York Street was located just east of the ever popular and bustling retail strip of the Clarendon Street, with an abundance of public amenity, lifestyle and public transport all within walking distance.
“This outstanding location continues to blossom as a chic inner city haven for many residential and commercial users alike which is no wonder, considering its proximity to the Melbourne CBD,” Mr Ryan said. “The purchaser can take comfort in the holding income available whilst they plan the next chapter leading up to the lease expiry in October 2017."
Mr Ryan said the South Melbourne property market continued to bustle with activity, with several other hotly contested properties being listed for sale in recent weeks.
Properties currently on the market and generating strong interest were:
• 9-17 Raglan Street, South Melbourne
• 15-35 Thistlethwaite Street, South Melbourne
• 31 Coventry Street & 22-24 Wells Place, Southbank