Telstra store premises in Melbourne CBD has $9 million price tag
The Telstra store premises on Collins and Swanston streets, reputed to be one of the busiest pedestrian city corners in Melbourne, will go to auction on March 22.
The shop at 220 Collins Street measures just 65 square metres and is situated on the ground floor of the 1932 Art Deco Manchester Unity building, whose completion was said to signal to Melburnians the end of the Great Depression.
It was subsequently subdivided and sold down as individual units in 1996. The Telstra store sits in the most prominent corner position of the building, providing dual exposure to both Collins and Swanston Streets.
It brings in estimated annual net income of $543,000 (with land tax recoverable from the tenant), equating to a yield of around 5%.
The vendors of the Telstra Store were swayed to offer the property to the market after the strong result achieved at Shop 1, 55 Swanston Street in mid-2011 which sold at auctionfor a tight yield of 5.55% with the understanding that Telstra is located on a better intersection in a much more populated segment of the street.
It stands on a prime piece of Melbourne CBD real estate opposite the Town Hall, with about 15 million pedestrians filing past every ear – 50,000 each day.
The store is being marketed by Josh Rutman, Mark Wizel and Max Cookes of CBRE with a price tag of $9 million plus and a guaranteed 5% annual rent increase.
Wizel expects local private investors to compete with offshore investors for the asset.
A recent report by Savills Australia found the Melbourne’s CBD retail property market to be holding up well despite the slowdown in consumer spending, with the overall vacancy rate still under 4% and street-front vacancies in the main Swanston Walk precinct at a low 1.2%.
According to Savills national head of research Tony Crabb, Melbourne CBD retail remains an attractive “defensive” asset offering relatively attractive yields of 4% to 7%.
“CBD retail, in particular, has attracted multiple buyers, not only for individual stores, but also for larger enclosed centres and arcades,’’ he says.
Recent nearby sales include 255 Swanston Street, which sold for $4.9 million on yield below 4%, and 303-305 Elizabeth Street, which went for $3.2 million on a 5% yield.
The retail spot is being offloaded by ASX-listed property fund manager Charter Hall, which has held it since 1997 in one of its small unlisted retail funds.
Telstra took over from Vodafone as its tenant last year. The shopfront has not been vacant in the last 40 years.
The Manchester Unity building was the tallest building in Melbourne when it was finished in 1932.
The corner tower is built in the commercial Gothic Modern style inspired by Raymond Hood’s competition-winning Chicago Tribune Tower.
Photographs by Alistair Walsh