Colliers International sees surge in activity in Melbourne CBD in early 2016
Colliers International has seen an unprecedented surge in demand for strata office property in the Melbourne CBD in the first quarter of the year.
Chris Ling, Colliers International Executive – Melbourne City Sales, said the first quarter of 2016 had seen significant demand for CBD strata floors, including both investments and vacant floors.
“Our Melbourne City Sales team is currently seeing an unprecedented surge in demand for CBD strata office properties in the CBD,” Mr Ling said. “This demand is powered by record low interest rates, a low Australian dollar and instability in offshore markets.
“In addition, given the current timing in the calendar year, business owners and operators are looking to secure new office space to set themselves up for the rest of the year. CBD vendors, meanwhile, are piggy backing off the momentum seen throughout 2015 in order to capitalise on the current environment."
In the most recent deal in this market, Colliers International sold a 320sqm whole floor at Level 8, 21 Victoria Street for $1.75million to a private investor. The sale, which represented a yield of 5.62%, set a new record for strata sales within the building be 25% - based upon the most recent sale in the building in early February.
“This property generated strong interest and fierce competition between local, interstate and offshore purchasers, to sell prior to the close of the EOI campaign,” Mr Ling said. “The lack of supply of prime CBD office investments is, without doubt, driving this demand."
A new 360sqm suite on the mezzanine level of 58 Franklin Street, due to hit the market in coming weeks, was also expected to generate a buzz among buyers of all types. Colliers International expects the whole floor, close to Melbourne’s core retail and university precinct, to attract interest for both commercial use and potential residential conversion.
In 2015, Colliers International recorded more than $35million in strata office sales in the CBD, with an average sale price of $1.95million and an average size of 367sqm.
“With vacancy rates below 8% in the Melbourne CBD, we are seeing current rental rates rise and as a result tenants and business owners alike are looking at the opportunity to own their own office as opposed to the increasing cost to lease,” Colliers International’s David Sia said. “We are also continuing to see an increased number of buyers taking advantage of purchasing property through their self-managed super funds."
According to the latest Colliers International CBD Office Research & Forecast Report, Melbourne’s CBD market continued to go from strength to strength, with high levels of net absorption and a corresponding low vacancy rate. The vacancy rate for the Melbourne CBD dropped to 7.7% in Q1 of 2016, dropping to as low as 5.1% in the north eastern pocket.
“As a result of these conditions, demand has spiked in the first couple of months of this year and it looks like strata space will be hotly contested in 2016,” Mr Hay said.
21 Victoria Street, Melbourne