Strata office sales make CBD records

Colliers International closes series of strata office deals for more than $11million

Seven Melbourne CBD offices have sold for record sums, highlighting the heightened demand for strata office assets in the Melbourne CBD.

Colliers International’s Chris Ling and Anthony Kirwan brokered deals for level seven at 552 Lonsdale Street and suites 202 and 310 at 546 Collins Street last week for a total of $4.175million.

The team also sold out a new strata office project at 420 Spencer Street, West Melbourne, four months ahead of completion, on behalf of developer Bill McNee’s Vicland Property Group.

“We managed to transact the four first-floor offices on Spencer Street in the past five months for rates of $6,600 per sqm, which translates to transactions between $1.55million and $2.6million per office,” Mr Ling said.

The $2million sale at 552 Lonsdale Street was $400,000 more than the most recent sale in the building and a record for office space in the legal precinct, while 546 Collins Street’s $1million and $1.175million sales were building records at rates of $9,616 per sqm (suite 202) and $8,835 per sqm (suite 310).

“We are experiencing strong demand from owner-occupiers who are desperate to secure CBD office space and as a result, both sales achieved market-leading capital rates,” Mr Ling said. “Buyers are willing to pay over the odds.”

Mr Ling attributed the strata office “buying frenzy” to the historically low interest rates, with the bulk of interest from local owner-occupiers but steady enquiry still coming from Asia and United States-based investors.

“We’re seeing more and more clients transitioning from leasing to buying as a result of the current market conditions, in order to capitalise on lease expiries and the low interest rate environment,” he said.

“Yields are dropping as low as 4.8 per cent in the CBD. With recent increases in residential interest rates, we are seeing some cautiousness from buyers who are uncertain as to what will happen in the commercial property environment in the near future.”

Level seven at 552 Lonsdale Street, which has a net lettable area of 258sqm, sold with vacant possession to a local accounting firm which is looking to establish a Melbourne CBD presence.

“The sale price represented a significant increase on the sale price of level six, which sold for $1.6million in September last year – a 25 per cent uplift in six months,” Mr Ling said.

“We received more than 120 enquiries for this property and six genuine offers, underscoring the substantial lack of supply for well-located whole-floor office assets.”

A local financial advisory firm purchased suite 202 at 546 Collins Street, 104sqm in the renowned McPherson’s Building, wanting to capitalise on the lease expiry, prime business location and low interest rate environment.

“The minimal supply of prime strata office opportunities in the Melbourne CBD encouraged keen interest from forward-thinking future occupiers, as well as local and offshore investors,” Mr Kirwan said.

In a separate campaign, a management consulting firm purchased suite 310, measuring 133sqm, with the view to occupy the site in the future and grow its portfolio in the office building.

The international expressions-of-interest campaign generated 132 qualified enquiries before several genuine first-round offers were made.

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