Investors continue to actively source well-located and income-producing assets despite concerns around COVID-19, with large amounts of capital ready to be put into Melbourne’s commercial property market.
Chris James, Shawn Luo and David Bourke of Fitzroys negotiated the $6.6 million sale of a high-profile office building at 372 Wellington Road, Mulgrave, centrally located in the popular south-eastern commercial precinct.
The sale price reflected a strong building rate of $4,000 per sqm.
The deal was negotiated via an Expressions of Interest campaign on behalf of a private owner who had held the property for more than 10 years.
Zoned Special Use Zone - Schedule 6 under the Monash Planning Scheme, the high-profile, two-level office building of 1,675sqm is on a substantial corner site of 4,742sqm with a combined frontage of 129m to Wellington Road and Enterprise Court, and has 70 on-site parking spaces.
ASX-listed and government tenants within the building include Ambulance Victoria and IMCD Australia Ltd, for an estimated net income of around $479,600 per annum.
James said the deal was struck within 24 to 48 hours after the close of the competitive campaign.
“More than 70 parties made enquiries, leading to five strong offers for the property and a sales process that was ultimately very straightforward,” he said.
“Reassuringly, there is still quite a substantial amount of capital to be invested into good commercial assets in the Melbourne market. This campaign alone demonstrated there are four underbidders with around $6.5 million each to spend who are actively pursuing assets.”
Luo said the campaign generated interest from a number of off shore groups whose interest in the market has been reinvigorated with the lower Australian dollar making acquisitions such as this more attractive.
“Investors are demonstrating that throughout the current environment there is still heavy demand to find strong income-returning assets, particularly given the exceptionally low official cash rate and volatility in the stock market.
“Commercial property is increasingly viewed as a stable alternative. Melbourne’s reputation worldwide reputation as an investment safe haven is also proving to be compelling factor during campaigns.”
The sale price reflecting a circa 7.25% yield on the passing income.
The property has a weighted average lease expiry of 2 years. Bourke said the new owner intends to hold the property long-term as a passive investment, and perhaps undertake repositioning works in the future to capitalise further on its strong return profile.