East Melbourne office building provides the first test of Melbourne’s investment market for 2019
Pent-up buyer demand and a shortage of available, investment grade property has prompted the owners of an East Melbourne office freehold to list the property for sale.
CBRE’s Melbourne Middle Markets division has been exclusively appointed to market 122-130 Wellington Parade following one of the strongest years for the Melbourne office market since 2008.
CBRE Josh Rutman, Mark Wizel, Lewis Tong and Kiran Pillai will manage the international Expressions of Interest campaign, closing 8th March 2019.
“Office investment transactions in the sub $100 million bracket are down significantly on previous years, with only five buildings in the Melbourne CBD sold in 2018,” Mr Rutman said.
“We are currently fielding substantial demand both from domestic and international groups seeking a foothold in the Melbourne office market, propelled by the overall economic environment and the underlying fundamentals driving tenant demand, particularly in the inner city.”
Offering views of the Melbourne Cricket Ground and surrounding Jolimont precinct as well as the Melbourne CBD, 120-130 Wellington Parade is a prominent seven-level building comprised of high quality office accommodation and several ground floor retail tenancies. It also features an exclusive, three-bedroom rooftop residence with an expansive outdoor terrace.
Constructed in the 1960’s, the building has undergone several major refurbishments. The efficient floor plate design caters for a variety of configurations, with each level housing a range of high calibre office tenants, benefiting from outstanding views and natural light as well as amenities on each floor.
A key buyer draw card is expected to be the building’s prestigious East Melbourne location, with the latest Property Council of Australia figures highlighting that East Melbourne has Australia’s lowest office vacancy rate of 3.1%.
CBRE’s Mr Wizel said the precinct had also continued to benefit from significant rental growth, particularly as supply in the precinct remained constrained.
“East Melbourne has benefitted from the flow-on effect of record low vacancies in the Melbourne CBD, with absorption and effective rent growth figures for the precinct among the strongest in the country,” Mr Wizel said.
“Forecasts suggest this significant rental growth will continue and provide near term rent reversion upside for assets such as 122-130 Wellington Parade, which offers an attractive, staggered lease expiry profile.”
Mr Wizel noted that domestic groups have been the most active investors in East Melbourne, but international players were beginning to target the precinct as highlighted by the sale of the Park Hyatt selling to Chinese group Fu Wah and last year’s sale of the Pullman Hotel to iProsperity.
“Appetite for quality commercial assets from overseas parties, particularly from Asia, has defied all of the commentator predictions over the past 12 months, and our early read is that this is unlikely to change in 2019,” Mr Wizel said.
Mr Rutman noted that 122-130 Wellington Parade’s large landholding and air rights provided a genuine “x-factor”, which could underpin future repurposing strategies or further upgrades to capitalise on the building’s protected views to Jolimont, the Melbourne CBD and the Yarra River.
“It’s arguably an opportunity for the next cycle, but, given the property’s prime location, vistas and strong holding income, we’re expecting the campaign to generate strong interest from land bankers and developers who are seeking well located, land-rich properties,” Mr Rutman said.
“Investors may choose not to develop this property, but there is such versatility here and some distinct opportunities for adding value and driving the asset’s income profile.”
The accessibility of the East Melbourne precinct has fuelled its popularity among residential developers such as CBUS, Mirvac, Icon and Golden Age, with the iconic 150 Clarendon Street by Salta setting the new benchmark for pricing several years ago.
Owner occupiers have been very active purchasers, with apartment prices consistently breaking the $20,000/sqm barrier, a key reason why developers continue to aggressively pursue sites in East Melbourne.
The area has also become a hub for medical practitioners and associated medical service providers, with St Vincent’s, the Royal Victorian Eye and Ear and Epworth Freemasons Hospitals all within the same district.