This was published 3 years ago
Stock-starved apartment builders boost value of tired office sites
A Chinese apartment builder is paying just over $8.5 million for a tired low-rise office at one of Melbourne's most valuable intersections, following an off-market negotiation.
The Schwarzkopf building, which is occupied by numerous tenants for varying lease periods, is on 1300 square metres at 1133 Malvern Road, Malvern, one lot east from the corner of Glenferrie Road.
The Schwarzkopf building is on 1300 square metres at 1133 Malvern Road, Malvern.
This intersection is where Malvern connects with two of Melbourne's most prestigious suburbs: Armadale and Toorak, the latter which has a median house price of about $4 million, according to Domain Group data.
GormanKelly director Mario Nobrega confirmed the sale of the 1980s glass building to BHC Property, which has a local office, but is financed by Chinese capital. Based on the investment's annual rental return, it is exchanging on a yield of 4.6 per cent.
Mr Nobrega said BHC was attracted to the property because of its land area and secure leases, some which run for five years, and "which will allow for appealing future bank funding".
Agents say that especially over the past year, stock-starved apartment builders have been driving up the value of rundown offices which traditionally would have attracted predominantly passive investors.
It follows a flocking of residential builders to Melbourne's suburbs, spooked by the potential oversupply of apartments in the CBD and some inner-city markets.
Earlier this month, Benson Property Group paid $10.5 million for a low-rise office opposite St James Park in Hawthorn, expected now to make way for a luxury apartment complex
That deal was also negotiated by Mr Nobrega, with JLL co-agents, Peter Sprekos and Lincoln Reynolds.
North of town in Brunswick, listed developer Mirvac has quietly entered negotiations to buy a two-level office on 7000 square metres opposite parkland for a speculated $25 million. Near the Sydney Road shops and Brunswick train station, the Albert Street holding is the subject of a land rezoning application which would allow it to be replaced with apartment buildings up to eight levels.
"Most existing offices benefit from high-profile main road locations and have a significant underlying land area, which given zoning and height overlays, make sense for developers [to purchase]," Mr Sprekos said.
"We are seeing this occur more and more over the years, with office buildings in East Melbourne, St Kilda Road, St Kilda and now Hawthorn being purchased by residential developers."
Last August, boutique apartment builder Time and Place agreed to pay about $60 million for two low-rise East Melbourne office buildings, for years occupied by the National Australia Bank, which was also the vendor.
The 200-222 Victoria Parade holdings are within one of Melbourne's most valuable suburbs, measured per square metre of land. Only a few weeks earlier, Mirvac and Freemasons Victoria reaped $200 million in two days selling off-the-plan apartments at their proposed Eastbourne complex, which will replace Dallas Brooks Hall.