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Market Insights

05.02.2020

Investors to circle Melbourne CBD’s Tomasetti House

 The ornate Tomasetti House in Flinders Lane is being brought to market following a shortage of sub-$100 million office investment opportunities in the Melbourne CBD. 

The 3,814sqm commercial building at 277-279 Flinders Lane was once one of the largest buildings in the CBD and is being offered for international sale by CBRE Melbourne Middle Markets, acting as exclusive agents on behalf of the Sydney-based vendor. 

Originally built by William Degraves in 1853 for flour milling and grain storage, the eight-level building is in the retail core of the Melbourne CBD, between Swanston and Elizabeth Streets, close to Degraves Street and Centre Place – providing direct access to Collins Street. 

The well apportioned floor plates offer three sides of natural light and accommodate several established retail and office tenants, with the building currently fully leased. 

Josh Rutman, who is marketing the asset together with colleagues Mark Wizel, Julian White and Lewis Tong, said that; “The market is seldom given the opportunity to acquire a central city freehold with three street frontages in such a desirable location, let alone one that has such a well aligned lease expiry profile with no options for the sitting office tenants.” 

“It is easy to throw around the word flexibility, but this building genuinely offers it to the market – buyers will have the option of renewing the current leases, occupying the building with their own business, converting it for other uses like hotel or residential, or refurbishing to attract higher retail and office rentals in the short term.” 

Given the strength of results achieved in 2019 for the few properties that were brought to market, Mr Rutman said the depth of demand for Melbourne CBD office buildings could not be understated. 

“We saw a dramatic fall in the number of sub-$100 million Melbourne CBD commercial office investments in 2019, so this will be a very revealing test of early 2020 investor demand for a quality office building,” Mr Rutman continued. 

“In this lower-for-longer yield environment, the search is on for assets that will provide genuine income growth potential and the office market has so far shown that it is capable of delivering this growth in Melbourne – which is why we expect domestic, interstate and international investors to run the ruler over this Flinders Lane asset.” 

With its rich and diverse heritage, Flinders Lane was previously the domain of rag traders and garment manufacturers, however, it has gentrified into one of the most desirable precincts in Melbourne in recent times. 

Similar to New York’s Chelsea and SoHo districts, the area has become synonymous with boutique and high fashion retail outlets, the city’s best restaurants and cafes, art galleries and quality office accommodation. 

Flinders Lane is becoming one of the major beneficiaries of the tightening Melbourne CBD office space availability, with tenant demand driving rents to levels of over $700 per square metre. 

Zelman Ainsworth, Head of Retail Leasing at CBRE, said that the foot traffic from commuters, tourists, students, office workers and shoppers was also having a profound effect on the ground floor and basement spaces in the area. 

“The arrival of several high-profile retail tenants, including Brunetti, to the block is further testament to the strength of the location, with retail rents now breaking the $4,000 per square metre barrier,” Mr Ainsworth said. 

“It has become a 365-day precinct for the CBD, which will be further buoyed by the construction of the Town Hall Metro Rail underground station, accessed directly from Flinders Lane.” 

Over the past 12 months and within the same Flinders Lane block, Swinburne University acquired Invicta House at 226 Flinders Lane for $44,000,000 to house its new city campus, and the Melbourne Theosophical Society purchased a portion of Manchester House for $13,500,000. 

Slightly further afield, 22 William Street on the corner of Flinders Lane, sold late last year for $52,000,000 to Fidinam Group, which is also planning a full refurbishment program to capture tenant demand for a Flinders Lane address. 

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