Small business snapping up Melbourne CBD strata offices for as little as $95,000: DTZ

Strata office space in the Melbourne CBD is being acquired by small businesses as their business premises for as little as $95,000, according to property services group DTZ.

DTZ strata agents Craig Hembrow and Danny Clark has sold 12 strata offices in the last few weeks totalling $2.7 million, with sales occurring in buildings on Little Collins Street, Collins Street and Queen Street.

Buyers include professional businesses, consultancies and small businesses in the medical, accounting, financial or business support services.

“These transactions have considerably tightened the market in properties in the sub 200 square metre range, to the point that some buyers are giving up due to frustration over a lack of available market stock” says Clark.

“This is partly attributable to a convergence of buyer and vendor expectations”.

Popular buildings for strata office purchases include 343 Little Collins Street on the Elizabeth Street corner, the Art Deco Manchester Unity building at 220 Collins Street on the Swanston Street corner and the modern 2 Queen Street building on the Flinders Street corner.

According to DTZ, limited supply is available in the prime East End of the CBD which is generally attractive to medical, corporate consulting, and financial services businesses.

Recent sales include a 32-square-metre office at 343 Collins Street, which sold for $95,000 – a rate of $2,981 per square metre rising up to $376,000 for a 63-square-metre strata office at 2 Queen Street.

Strata office sales 

Address

Sale Price

Area (sq.m.)

Rate per m2

Sales Transaction

204/220 Collins Street

$309,570

60

$5,159

Investment returning 6.91% return

303/343 Little Collins Street

$110,000

35

$3,142

Vacant possession

408/343 Little Collins Street

$125,000

39

$3,205

Vacant possession

409/343 Little Collins Street

$126,000

39

$3,230

Vacant possession

702/343 Little Collins Street

$95,400

32

$2,981

Vacant possession

709/343 Little Collins Street

$285,000

82

$3,476

Vacant possession

207/2 Queen Street

$376,000

63

$5,968

Investment returning 7.71%

1111/227 Collins Street

$230,000

46

$5,000

Vacant possession

208/430 Little Collins Street

$255,000

39

$6,538

Vacant possession

405/220 Collins Street

$275,000

27

$10,185

Vacant possession

101/2 Queen Street

$303,000

49

$6,183

Vacant possession

102/2 Queen Street

$217,000

35

$6,200

Vacant possession

 Source: DTZ

In August, Savills research confirmed private investors were the most active purchaser category in the strata office market in the prior 12 months, having purchased 42 properties worth a total of more than $26 million.

The recent Urbis Melbourne strata office market report calculated that there are some 1,800 strata units within the Melbourne CBD, with an average sales turnover approaching 130 units per annum – this represents 7% per cent of total stock.

The report notes that prior to 2000, the market was characterised by the creation of strata units from the conversion of older, conventional office buildings, with few purpose built facilities.

However, since 2000, some 500 strata units have been supplied, all in purpose built facilities, with most in the Docklands precinct.

These include Aquavista at 401 Docklands Drive, Docklands (205 units, built 2007) and Site One at 757 Bourke Street, Docklands (53 office units, built 2007).

Strata developments currently under construction include Lifestyle Working Collins Street, at 838 Collins Street featuring 137 units and 35 Exhibition Street, featuring approximately 40 units, both of which are due for completion in 2013.

According to the Urbis report, yields for prime strata office suites are currently in the range of 6.5% to 7%, with secondary yields generally in the range of 7.0% to 8.0%, on net rents.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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