Former Kodak and CUB Building Set for Self-Storage Play
The former Kodak building and Carlton & United Breweries headquarters in Abbotsford is set for a new chapter as a self-storage facility after being sold for $19 million.

Fitzroys’ Paul Burns and Chris James sold the 2-6 Southampton Crescent, 36 Bond Street and 27-29 Duke Street property, totalling 3,099sqm of land opposite Carlton & United Breweries’ famous Yarra River brewery, on behalf of developer Hengyi.

The offering comprises the part-refurbished distinctive curved office/laboratory building at 2-6 Southampton Crescent with 6,048sqm of net lettable area (NLA), originally built in 1928 for Kodak. It is currently 28% leased to ASX-listed Starpharma, which recently exercised its 5-year option. Gross passing income from the property is $840,000pa and there is considerable upside from this level.

The new owner is a self-storage operator with other facilities in Melbourne, and they intend to reposition the Southampton Crescent building into a self-storage facility.

“This location presented a unique opportunity for our construction and property development division,” said Gayle Sachs, Director of the new owners Howzit My China Pty Ltd.

The sale includes the adjoining Duke and Bond Street land, currently with warehouses leased on short and medium-term deals. This parcel of land has an approved permit for an additional 5,107sqm, 9-level commercial building with 129 parking spaces. The new owners intend to build within the town planning approval to create a state-of-the-art self- storage facility.

“The owners have been looking for a suitable building in the Abbotsford area to expand their self-storage operations for some time now. The existing building is a simple conversion to self-storage, and the approved Town Planning Permit enables a ramp-up to 500 storage units really quickly. With approvals in place and ready to go, this facility and the land next door will expand to 1,200 units in no time,” said Storcad Director and specialist self-storage designer Javier Rezzonico, who is involved with the project.

“We are pleased to have agreed to an unconditional contract of sale for the property. The project did not fit with our existing business model of mixed-use residential-focused projects; however, we look forward to seeing the new owner redevelop the site in the future,” said Hengyi General Manager, Simon Manley.

Burns said, “Changes in living and working preferences accelerated by the pandemic have prompted consistent increases in fee rates and revenue growth in self-storage facilities in recent years. Listed and private self-storage players continue to record strong sets of numbers amid an ongoing imbalance between supply and demand.

“Abbotsford and the surrounding inner-Melbourne suburbs have a large and growing number of medium and high-density dwellings that are conducive to requiring self-storage options nearby, making this an opportune repositioning play.”

“Particularly at a time of flexible working arrangements, more and more Melburnians are looking to live in inner suburbs with high accessibility and quality lifestyle amenity. Developers such as Salta, Hamton, Icon and Pace have all recently completed residential projects in rapidly gentrifying Abbotsford, and development in neighbouring locations such as Collingwood, Richmond and Fitzroy is continuing apace.

“The elevated demand for self-storage facilities in the area is very likely to increase in the coming years.”

“As a location, Abbotsford is one of Melbourne’s last city fringe suburbs with genuine unrealised development potential, and this offered a rare, ready-to-go development opportunity.”

James said the property also attracted strong attention from investors and value-add players.

“A number of buyers were looking to capitalise on the growing demand from office users seeking affordable, city fringe accommodation, compared to heated commercial markets such as Richmond and Cremorne. Buyers are confident demand for this type of accommodation will continue rebounding as cost-conscious tenants seek accommodation with flexible floor plates.”

The Puckle Street Collection Sells for $5.61m
Investors and landbankers have jumped at the generational opportunity to buy 3 side-by-side freeholds in one of Melbourne’s best-performing shopping strips.

Fitzroys’ Ervin Niyaz and Chris Kombi, in conjunction with CBRE’s Alex Brierley and JJ Heng sold the unique offering of 42, 44 and 46 Puckle Street in one line for $5.61 million.

The sale price reflected a sharp 3.4% yield and a high land rate of $10,226/sqm, and was well above the vendor’s expectations.

The 3 shops are all leased to experienced operators, including Smile Thai on a 5-year lease from October 2019, and State of Grace Collective on a 4+3+3-year deal and Body Catalyst on a 3+5-year deal, both from May 2021.

The properties are on a substantial combined land area of 547sqm with over 15m of frontage to Puckle Street, offering great development upside with surrounding projects of 9-plus levels, including the landmark Penny Lane development across the road which is delivering 114 apartments, a Palace Cinemas and Guzman y Gomez to the strip.

“The buyer is a landbanking investor who saw the incredibly unique opportunity to buy 3 side-by-side freeholds and this large amount of land in one of Melbourne’s best shopping strips,” Kombi said.

“This kind of opportunity hasn’t come up in Puckle Street for at least 30 years.

“The purchaser can enjoy a strong income stream while they assess their options for the site over the medium-term. The sharp yield reflects the competition generated in the sales process and the huge confidence the market has in the future of Moonee Ponds. This was an excellent chance to invest in what is quickly becoming the lifestyle hub of Melbourne’s north-west with a proven track record for capital growth.”

“We also had interest from investors wanting to buy the shops both individually and in one line, attracted to the excellent trading prospects and future rental growth potential due to the ongoing completion of new projects in the surrounds.

According to Fitzroys’ Walk the Strip report, vacancies on Puckle Street, Moonee Ponds came down from 4.6% to 3.2% in 2022, among the lowest of Melbourne’s iconic shopping strips. The precinct also includes Moonee Ponds Central shopping centre, a Woolworths supermarket, and a number of local and national eateries and service retailers.

Niyaz said Puckle Street’s excellent performance in recent years and capital growth in the precinct was underpinned by the generational development boom that is taking place in Moonee Ponds, which has seen the delivery of the Mason Square precinct and will be further supported by ongoing developments such as Penny Lane, and the future $2 billion residential and lifestyle overhaul of the Moonee Valley Racecourse nearby that will introduce 2,000 new dwellings as well as commercial space to the area.

“A huge number of Melburnians are looking to live in well-connected inner-suburban locations with high-quality and varied lifestyle and hospitality amenity, particularly at a time of flexible working arrangements. Moonee Ponds ticks all the boxes, with a high-performing shopping, hospitality and lifestyle precinct anchored by Puckle Street, and excellent public transport linkages by train, tram and bus,” Niyaz said.

Stamp Duty Reform to Encourage More Market Activity
The Victorian Government’s move to abolish stamp duty for commercial and industrial properties is likely to encourage more transactional activity across the market, according to Fitzroys.

“The abolition of stamp duty will likely encourage higher turnover of commercial and industrial real estate, spreading these historical and often prohibitive up-front costs over a 10-year period,” said Fitzroys Division Director - Agency, Chris James.

“It will reduce the barrier to entry for investors in commercial real estate and assist those with less upfront capital and potentially entice interstate investment in Victorian property,” James said.

“Despite this Victoria’s still has one of the highest stamp duty rates in the country which given the state’s finances will be unlikely to change in the near future.

“The impact on investment yields is difficult to determine; this will be affected by the funding options buyers take, with cash flow being impacted by the annual charge. The devil will be in the detail, and we anticipate more commentary to be provided shortly.”

Commercial and industrial properties will transition to the new system as they are sold from the middle of 2024, with the annual property tax to be payable from 10 years after the transaction.

The first purchaser of a commercial or industrial property after 1 July 2024 can choose to either pay the property’s final stamp duty liability as an upfront lump sum, or transition to an annual payment by opting to pay instalments over 10 years equal to stamp duty and interest, with a government-facilitated transition loan.

The annual property tax that will ultimately replace stamp duty for commercial and industrial property will be set at a flat 1% of the property’s unimproved land value.