Landmark Office Sale Signals New High for Commercial Investment Market
Following an international sales process, PACE Development Group has sold the currently under construction Collingwood office building in Melbourne’s city fringe.
The sale was exclusively handled by the CBRE Melbourne Middle Markets team of Scott Orchard, Josh Rutman, Lewis Tong and Joseph Du Rieu, with the private purchaser being a new entrant to the Australian commercial property sector.
Scott Orchard, Director of the CBRE Melbourne Middle Markets team, said the purchaser is the same investor who made his first leap into the commercial property market back in September, purchasing a petrol station at CBRE’s Premium Property portfolio auction.
‘The buyer here represents a new source of capital in Australia’s commercial property market, and is another testament to the many initiatives required to find new buyers in real estate market,” Mr Orchard said.
“The seasoned businessman was wanting to acquire an asset that didn’t need excessive time spent on maintenance, whilst also offering attractive depreciation benefits and being close to where he grew up in the heart of Collingwood.”
Located on the corner of Langridge and Wellington Streets, the 52% leased office building is set to be completed early in 2020, with rental guarantees topping up the shortfall in tenants taking up physical space in the building.
Situated on just 510sqm of land, the metrics are an indication of where appetite sits for office product in Melbourne, with the final deal exceeding a land rate of over $60,000/sqm.
“Despite some concerns about the amount of new office supply in Melbourne’s city fringe, the appetite for office investments in Melbourne is at fever pitch, across all geographies, and this is having a major impact on pricing as very few quality assets have come to market compared to this time last year,” said CBRE Director Josh Rutman.
“When half vacant office assets are selling for over $10,250/sqm, it is an interesting indication of where we are at in the investment cycle, even with interest rates at an all-time low and the banks starting to loosen up their lending criteria” said Mr Rutman.
The deal follows other high profile offices that have sold whilst not being completed, such as Michael Fox’s 1-11 Gordon Street, Cremorne project, which changed hands for $50,000,000 & around $10,000/sqm.
The man behind the Langridge Street development, Shane Wilkinson, Managing Director of PACE Development Group said, “Our office development at 51 Langridge Street was the hottest investment product of 2019, and is one of the most exciting projects I’ve been involved in during my year career.”
“PACE are incredibly proud to deliver the A-grade office building and we know an office building of this quality, in this pocket of Collingwood is what the market has been crying out for. We look forward to welcoming the incoming tenants across the Learning & Development, Financial Services, Medical and Hospitality sectors into a sustainable building which we are truly proud of.”
“The levels of leasing enquiry and interest from the market to purchase the property during the construction phase has been a true testament to the strength of the precinct, and the expected growth in the area as Collingwood matures into a bona fide office location. We are excited to continue to deliver great places for people to work as we deliver on our upcoming office projects in Cremorne, Hawthorn, North Melbourne and Blackburn.”