Service Retail Surge Attracts Local and Offshore Investors to Premium Suburban Asset
Local and offshore competition for a first-class suburban commercial and medical asset has led to a strong $9.47 million sale, as investors seek securely leased properties in Melbourne’s shopping strips amid growing demand for service retail.
Fitzroys agents David Bourke and Terence Yeh, in conjunction with Savills, sold the prominent two-level building of 1,336sqm at 789 Pascoe Vale Road in Glenroy on behalf of a private investor/developer.
Bourke said the competitive Expressions of Interest campaign and subsequent strong result was driven by the commanding property’s blue-chip tenancy profile and secure lease terms, with a weighted average lease expiry of more than eight years.
The premium freehold was entirely refurbished in 2017 and is fully leased to tenants the Commonwealth Bank, Modern Medical (part of Zenitas Healthcare Group) and real estate agency Ray White.
A local private family purchased the asset at a 5.25% yield.
The high-profile building is divided into three separate modern spaces across two levels, including three ground floor tenancies, with Modern Medical occupying one as well as the entire first level. It is on a Commercial 1-zoned landholding of 910sqm, and has a prominent frontage of 19.91m to Pascoe Vale Road and rear access.
“With the recent cuts to the official interest rate, buyers are recognising that now is an ideal time to secure strong income-producing commercial property assets,” Bourke said.
“Service retail is coming to the fore across Melbourne’s shopping and retail precincts, in response to the city’s nation leading population growth. Melbourne’s strip centres are home to a growing number of health and personal care businesses.
Amid changes in the retail environment, it remains difficult for the online world to replicate this service offer, and well- located properties with secure leases to blue-chip tenants will continue to attract strong investor demand,” Yeh said.
The vendors had completely revitalised the building, repositioning the property as a modern, premium suburban commercial asset, and further enhancing its prospects as a long-term investment holding.
The property benefits from its direct proximity to the Glenroy train station, connecting the site to the Melbourne CBD and wider transport network, a number of bus routes, and is also close to the Western Ring Road and Tullamarine Freeway, with ample surrounding public car park options just metres from the property.
Another Landmark Deal in Melbourne’s Booming Office Market
A Charter Hall-led consortium has acquired Telstra’s headquarters in the CBD’s east end for $830 million.
The deal is the latest major transaction in the Melbourne office market, following Dexus acquiring 80 Collins Street for $1.476 billion.
Charter Hall, together with its Charter Hall Prime Office Fund and Canada’s Public Sector Pension Investment Board, acquired the 47-storey, circa-66,000sqm office tower at 242 Exhibition Street at a yield of around 4.5%. Telstra’s lease over the building runs until 2032.
Nearby, Charter Hall’s $600 million Wesley Place development on Lonsdale Street is currently under construction.
Prime rents could rise a further 30% to 40% in the city over the next five years, according to BIX Oxford Economics, and ongoing strong tenancy demand will keep vacancy rates low throughout a period that will see around 250,000sqm of new office stock brought to the market.
Disclosure: The weekly Fitzroys Property Wrap is for information only on transactions in the Melbourne property market. Fitzroys provides this information as a public service. We are not purporting that all sales and leases within this report were transacted by Fitzroys. Terms/Privacy © Copyright 2019 Fitzroys.