Docklands restaurant James Squire sells with 9.3% yield as investor appetite for Melbourne eateries grows

The Docklands premises of James Squire Restaurant and Bar has been snapped up by private investors as a new report highlights a growing appetite for restaurants and cafes with established tenants in metropolitan Melbourne. 

The two-level, 950-square-metre property at 1 Pearl River Road within Docklands’ Victoria Harbour precinct was bought by a private investor for $4.3 million on a 9.3% yield following an expressions-of-interest campaign directed by Nick Peden and Clinton Baxter from Savills Australia. 

The sale price equates to $4,500 per square metre and “represented a strong price for ground and first floor strata retail,” Peden says. 

James Squire Restaurant and Bar pays a current net rental of $400,000 per annum with fixed annual 4% rental growth. 

Peden says the property attracted a great deal of interest from investors “keen to take advantage of the secure lease profile and prime waterfront location”. 

“Properties on the waterfront always attract a good level of interest and with a secure 10-year lease with a 10-year option, commencing July 2011, to a well-established business, it was always going to see a reasonably good result,’’ says Peden. 

“With the Docklands residential population growing rapidly and the precinct maturing in commercial terms, investors have again turned their attention to this remarkably active and evolving location,’’ says Baxter. 

According to the Docklands Authority, the precinct is expected to become home to 17,000 people, a workplace to 40,000, and a destination for 55,000 visitors per day by 2020. 

The sale of the Victoria Harbour restaurant premises comes as a Colliers International notes a pick-up in investor demand for restaurants and cafés with established tenants in Melbourne’s east, about two kilometres from Docklands. 

Colliers International’s Hamish Burgess and Ben Baines report receiving a “flood of enquiries from eager investors” since listing The Palms restaurant at 213-215 Blackburn Road in Mount Waverley.

The recently renovated 435-square-metre property, which sits on 1,015 square metres and has a 10-year lease, is attracting interest is in the vicinity of $1.9 million to $2 million. 

Burgess says interest in the property, which will go under the hammer on March 29, confirms the recent trend towards restaurants and cafes as investments.

“There has been a noticeable trend evolving lately whereby sub-$5 million property investors are searching for restaurant and café investment properties with secure, long-term tenancies in metropolitan Melbourne,” he says. 

According to Burgess investors are focusing on restaurants and cafés with high-profile, well-established tenants. 

“This represents increased security, as operators are continuing to spend significant amounts on fit-outs and don’t want to lose clientele by moving location,” he says. 

According to Baines, recent sales of restaurants in Melbourne’s east indicate that investors are willing to pay a premium for this sort of investment. 

Three recent restaurants sales all achieved yields of under 5%:

•  210 Blackburn Road, Glen Waverley: achieved a yield of 4.6% with Subway as a tenant
• 313 Stephensons Road, Mount Waverley: achieved a yield of 4.1% with Pizza Hut as a tenant
• 319 Stephensons Road, Mount Waverley: achieved a yield of 4% with Great Eastern Hakka Restaurant as the tenant