Colliers International auctions securely leased ground and basement levels of 118 Russell Street
Two prime corner retail assets at the Paris End of the Melbourne CBD sold under the hammer to two separate buyers last week, highlighting the sustained demand for central-city trophy assets.
The ground and basement levels of 118 Russell Street, at the intersection of Little Collins Street, are securely leased to hospitality and lifestyle tenants and fetched $4.95million combined.
Award-winning bakery café Brioche By Philip occupies the ground-level tenancy of the iconic Fender Katsilidis-designed Hero building, while popular Pilates and barre gym S3 Studio occupies the basement.
Colliers International’s Oliver Hay, David Sia and Daniel Wolman handled the auction campaign.
“Both floors were met with substantial enquiry from local and international retail investors,” Mr Hay said.
“At the Paris End of the CBD on a highly visible corner, they are considered real trophy investments. It is becoming increasingly evident that the market is prepared to compromise on yield for the enjoyment and status of a premium CBD asset.”
A Chinese investor won the basement level for $3.2million, achieving a record yield of 5.12 per cent for basement strata retail assets in the city. The listing received 108 enquiries throughout the campaign and 11 contracts were requested.
Another offshore investor won the ground floor for $1.75million following a 22-bid contest with five other parties, resulting in a yield of 3.56 per cent.
Mr Hay said both floors showcased high-quality fitouts, which would provide the buyers with long-term depreciation tax benefits.
“With the tenancies taking a combined rent total of $226,167 per annum, plus GST and outgoings, the return on investment is unquestionable,” he said.
“Brioche By Philip, which has claimed awards for the best bakery and best sourdough bread in Melbourne, has committed to seven years, commencing in April last year.
“S3 Studio has signed a three-year lease, starting at the end of 2015 with three further options to renew.”
Mr Sia said the prime location, within “a stone’s throw” of Melbourne landmarks like Chinatown, high-end Collins Street boutiques and popular bars and eateries, was the key selling point.
“The building receives high volumes of pedestrian traffic and street exposure, especially given the surrounding high-density office towers, including 120 Collins and the Westpac headquarters,” he said.
“The area consists of a concentrated and constantly developing residential and workforce population. There is convenient access to public transport, including Parliament Station and city tram routes on both Collins and Bourke streets.”