Syndicate flicks CBD strata office assets for record sum

Colliers International sells two whole office floors for second time in three years

Two whole office floors at the coveted “Paris end” of Collins Street have sold within weeks of being listed for international expressions of interest, demonstrating the scorching demand for strata in the CBD.

Levels four and five at 100 Collins Street have sold for $3.2million and $3.1million respectively, setting a new record for Melbourne CBD strata office assets.

Colliers International’s Oliver Hay, Chris Ling and Anthony Kirwan managed the sales campaign on behalf of a private syndicate, marking the second time the agency has sold both levels in less than three years.

“Our team executed a property-specific sales strategy for these prestigious whole-floor opportunities, which successfully captured the keen interest of local occupiers and investors from Australia and Asia,” Mr Kirwan said.

“This exceptional result has rerouted pricing in the Melbourne CBD strata office market, with our valued clients relishing an extraordinary 70 per cent uplift in value since their $3.7million purchase less than 24 months ago.”

Level four was offered to the market partially leased to Kabo Lawyers and sold to a state-owned Chinese HR organisation, a first-time entrant into the Australian marketplace, for a record-breaking $11,348 per sqm.

“The buyer intends to lease out the property for five years before occupying it in the future,” Mr Kirwan said.

“Owner-occupiers have made up about 55 per cent of all purchasers of Melbourne CBD strata office transactions more than $1million so far this year. Offshore investors account for about 35 per cent, followed by local investors.”

Mr Ling said level five’s sale price, which reflected $11,313 per sqm, set a tempting example for other CBD strata office owners to offload their assets and capitalise on the hot market.

“With just 12 months left to run of the lease and no further options to renew, level five was sold on a sharp 5.5 per cent yield,” he said.

“This is indicative of the insatiable investor demand fuelled by the historic low interest rate environment Australia is currently experiencing.

“It has never been cheaper for Australians to borrow money.”

The two levels have a combined net lettable area of about 556sqm and encompass six separate titles.

“Both floors will be vacant by July 2018 and require imminent capital expenditure to attract premium Collins Street rental rates,” Mr Hay said.

He said the limited supply of prime grade strata office stock throughout the CBD was creating pent-up demand for such assets.

“With no new construction of strata office properties in the CBD, investors and owner-occupiers continue to snap up opportunities at record rates,” he said.

“We’re seeing prices vastly inflate in short periods of time, due to a culmination of factors creating ‘perfect storm’ selling conditions.”

Mr Kirwan said strata offices were once a poorly considered asset class but were now receiving unprecedented levels of enquiry, influenced by the record low interest rate environment.

“The current global uncertainty is generating more offshore capital into commercial property, as Australia is considered a ‘safe’ option when compared with the turbulence across Asia, the US and the UK, with Melbourne and Sydney being preferred investment locations,” he said.

“Melbourne’s population is rapidly growing and expected to overtake Sydney in the next 13 to 15 years, in part due to the relative affordability of real estate.”

Colliers International Melbourne CBD Investment Services city sales 100 Collins Street strata office asset whole floor sale transaction commercial propery Paris End

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