Investors limber up to buy Melbourne’s landmark Virgin Active gym

The space housing Melbourne’s first Virgin Active health and fitness club has been listed for sale in a move tipped to generate one of the city’s largest strata space sales.  

CBRE has been appointed to market the 138 Bourke Street space, which offers a 15-year lease with options to Virgin Active – one of the world’s leading fitness chains operating more than 266 gyms in the UK, Italy, Spain, Singapore and South Africa with more than 1.2 million members.  

The property is being offered on the heels of Virgin Active recently committing to its second Melbourne facility within the 567 Collins Street office development, being developed by Leighton. It will become the group’s 5th gym in Australia.  

CBRE’s Mark Wizel, Justin Dowers and Josh Rutman will steer the sale campaign for the three-level Bourke Street complex via an expressions of interest process closing 29 August 2013.  

Mr Dowers said the strength of the Virgin Active tenancy covenant was expected to attract significant buyer interest.  

“Rarely do investors have the opportunity to purchase properties of this nature in the east end of the Melbourne CBD, let alone one leased to a single tenant of the calibre of Virgin Active,” Mr Dowers said.  

Virgin occupies the space under a lease expiring in July 2024. The current net annual income is $1,713,000, with a bank guarantee of 12 months.  

Mr Wizel said the gym had a large membership catchment which was supported by the surrounding office workers and residents in the east end of the Melbourne CBD, which is continuing to grow rapidly due to the high density residential development activity in the precinct.  

“The Melbourne CBD is benefiting immensely from the significant growth in population which has been underwritten primarily from Asian migration and the trend towards inner city apartment living,” Mr Wizel said.  

“This growth in residents has increased the demand for service based retailing which has allowed businesses such as Virgin Active to thrive.”  

Mr Dowers said that the timing to offer a securely leased investment such as 138 Bourke Street was opportune given the demand / supply imbalance in the market for properties of this nature.  

“There is no doubt that the low interest rates are bringing a larger quantum of buyers back into the market, with the majority of the interest directing towards retail property with long and secure lease covenants, in addition to consistent rental growth,” Mr Dowers said.