Investors have shown confidence in Melbourne’s Western End of the CBD, snapping up three retail shops under the hammer for a combined $6.55 million.
Three retail outlets in Melbourne’s west-end have sold at separate onsite auctions – achieving sharp yields of between 4.00% - 4.50%, which demonstrates ongoing yield compression in the Western CBD pocket.
Shop 1, 500 Flinders Street was purchased for $1.45 million after a highly competitive auction that attracted interest from seven bidders.
The 118sqm vacant, ground floor retail shop transacted at a building rate of $13,718 per square metre. The purchaser was a local Vietnamese CBD landlord who purchased the property off the back of strong growth and ongoing rise in local tourism. The purchaser, who owns and operates a Vietnamese bakery in Footscray, plans to open a high-end Vietnamese restaurant at the property.
China-based developer Hengyi has officially sold its entire ‘William Court Portfolio’, comprising eight retail shops positioned underneath a 24-storey serviced apartment and residential complex. Closing out the portfolio, Shops 1 and 2, 528 Little Bourke Street sold for $2.96 million - $460,000 above reserve and reflecting a yield of 4.18%. The properties, located in a food court, are tenanted by Tahini Lebanese Diner and Bruce Lee Sushi.
The third transaction, also part of the William Portfolio, involved a 50sqm retail shop at 2-10 Guests Lane occupied by Schmucks Bagels. The purchaser, an existing CBD landlord, was attracted to the property given its position surrounded by high rise apartments. The property sold for $1.14 million, reflecting a yield of 4.50%.
Simon Manley, Business Development Manager of Hengyi Australia, commented on the transaction: “We are really pleased with the outcome and believe this project will stand the test of time. We wanted to capitalise on the strong commercial property market conditions, so we feel the timing could not have been better.”
CBRE’s Tom Tuxworth said the sales highlighted growing momentum in Melbourne’s western pocket of the CBD.
“Traditionally, there has been some disparity between assets located in the east-end and retail core of the CBD compared with the west-end. Sales within the east-end tend to achieve yields of between 3.50% - 4.00%, whilst those in the west are typically up to 6.00%,” Mr Tuxworth said.
“As highlighted by these recent transactions, Melbourne’s western end of the CBD has become a hot target for investors due to its proximity to Southern Cross Station and links to Melbourne Airport via Skybus and access to Southbank and Crown’s entertainment precinct.”
Verity Jenkins of CBRE Research Senior Analyst said population growth was a factor driving CBD retail performance, rising by 25% since 2013 to 36,885. By 2036, the population of Melbourne (CBD) is expected to reach 67,469 - 83% higher than the population in 2016.
Recent deals in Melbourne’s East-End:
Unit 1, 50 Market Street: $1,850,000 and 4.10% yield
Ground floor, 263 Little Collins Street: $3,4000,00 and 4.26% yield
Shops 9 & 11, 1 Little Collins Street: $2,600,000 and 3.60% yield
Recent deals in Melbourne’s West-End:
2-10 Guests Lane: $1,140,000 and 4.54% yield
Shops 1 & 2, 528 Little Bourke Street: $2,960,000 and 4.18% yield
Shop 1, 500 Flinders Street: $1,450,000 and $13,718/sqm building rate
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
