St Kilda Road to lead Melbourne office sales: CBRE

Investors are expected to invest $800 million in office assets in Melbourne this year, with activity focused outside the CBD, according to the latest report by CBRE.

The Melbourne Office MarketView report found St Kilda Road has been the site of a series of sales in the six months leading to March 2012.

“With a shortage of assets available in the CBD there has been a progressive shift towards properties previously overlooked by investors and this has resulted in a number of transactions outside the CBD/Docklands precinct,” CBRE senior director of institutional investment properties Mark Coster says.

“We expect interest in the St Kilda Road precinct to continue to strengthen, given its relative affordability compared to other markets and increasing momentum on the leasing side.

Click to enlarge

Major transactions in the six months leading to March include 601 St Kilda Road, which sold for $30 million to Shakespeare Investments; 484 St Kilda Road, which was purchased for $68 million by Abacus and Heitman LLC; 441 St Kilda Road, which sold for $58 million to Centuria Property; and 607 St Kilda Road, which sold for $28.5 million to private Chinese investor Casino Investments.

Offshore investors are expected to be the main drivers, closely followed by domestic groups with private investors and syndicators focussing on the lower price bracket. Assets above $50 million have attracted offshore investors while private investors and syndicators have been seeking assets backed by government tenants with long weighted average lease expiries.

“At a global level, Australian office assets continue to appear attractively priced based on conventional pricing models,” says CBRE senior research analyst Erin Obliubek.

“This, coupled with the resilience of the Australian economy, high liquidity, attractive investment yields and market transparency, is driving investor interest in key CBD markets such as Melbourne.”

Melbourne recorded $1.1 billion in sales in 2011 accounting for 15% of the national office sales volume.

Significant transactions in 2012 include the $53 million sale of 565 Bourke Street, $67 million sale of 477 Collins Street and the sales of 50% interests in 242 Exhibition Street and 120 Collins Street.

There has been an ongoing compression in investment yields in both the CBD and suburban markets, according to the report.

“In the CBD, implied yields have recovered by 60 basis points since the market trough in Q3, 2009 to be circa 7%.”

The report says premium yields were considered to be in the 6.5% to 7% range.

Alistair Walsh

Alistair Walsh

Deutsche Welle online reporter

Community Discussion

Be the first one to comment on this article
What would you like to say about this project?