A partially refurbished and mostly vacant office tower in Melbourne’s St Kilda Road precinct has sold for almost $18 million.
CBRE’s Melbourne Middle Markets team of Josh Rutman, Mark Wizel, Lewis Tong and Scott Orchard negotiated the unconditional sale of 1 Bowen Crescent, a property built by trucking magnate Lindsay Fox as offices for his Linfox company.
The seven-level building, which is located near the new ANZAC train station, last changed hands in 2017, when it was sold on behalf of philanthropist and tech entrepreneur Malcolm Freake.
Following a string of major sales in the precinct, Mr Rutman said the sale typified the rapid capital growth in the St Kilda Road office market in recent years, with the sale price representing a 30% uplift since 2017.
“Vacant building sales are the purest test of investor confidence, particularly given the amount of equity required for these transactions,” Mr Rutman said.
“The result for 1 Bowen Crescent is the latest example of investor confidence in the St Kilda Road precinct, despite some concerns about disruptions from the construction of the new train station.”
Mr Rutman noted that the sale also highlighted a resurgence of interest in St Kilda Road’s office prospects following a series of residential conversions in recent years.
“As the Melbourne CBD market continues to tighten, with rents pricing many tenants out of the market, St Kilda Road has a newfound relevance in the Melbourne office landscape, with several buildings recently achieving rental deals of over $500/sqm,” Mr Rutman said.
“The building rate achieved for 1 Bowen Crescent was over $7,100/sqm for a vacant office needing major re-positioning - and one without a traditional St Kilda Road address. This closely aligns with some of the recent building rates achieved for St Kilda Road’s best, fully-leased investment offerings over the past 12-months.”
Mr Rutman said groups like Vantage Property Investments, the Myer Family, Bayley Stuart and John Beville had all capitalised on surging values in the area by selling their office holdings, predominantly to Asian and interstate interests and for significant capital gains.
“The Bowen Crescent sale campaign attracted strong interest from domestic, interstate and internationally based investors, who saw the opportunity to capitalise on strong buying conditions before the area’s new train station is operational,” Mr Rutman said.
“We also fielded interest from a range of owner occupiers considering moving out of the CBD and looking to put their stamp on a freehold building.”
CBRE’s Lewis Tong said several major St Kilda Road residential projects proposed for sites occupied by older style office buildings had been reoriented back towards commercial use in response to current market conditions.
“With minimal office stock on the market in the Melbourne CBD, there has been a gravitational pull towards St Kilda Road, with many Asian groups seeing the precinct as a strong prospect, especially given the recent positive statistics for net effective rental growth,” Mr Tong said.
“We saw this exact trend play out at 424 St Kilda Road, where a major player out of Asia bought an existing office building for refurbishment after the previous owner was intending to carry out a high-end residential project on the site.”
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