The 311sqm, two-storey building is on a 212sqm Activity Centre-zoned site and is leased to two long-established tenants, with Eternal Bridal occupying the ground floor on a new 3+3+3-year lease, and the first floor leased to highly-popular Katuk Bar on a 10-year term.
A private local family was the vendor.
Waddell said the property offered a passive investment with long-term leases with secure covenants, and excellent prospects for rental growth.
“The Jam Factory redevelopment is directly opposite and this was a big motivation for interest in the property from buyers, who were anticipating strong rental growth to follow.”
Newmark Capital, Gurner and Qualitas have recently received approval for their $1.5 billion redevelopment of the iconic precinct, which will include 18,500sqm of retail space, 20,000sqm of offices, 400 residences, a five-star hotel and an upgrade to the cinema.
“All investors were looking for long-term return and further upside in the future with all the development happening nearby,” Waddell said.
Other major developments in the area include Vicland’s recently completed 11 Wilson Street office building and Goldfields’ new office tower at 627 Chapel Street, while US company Greystar is planning Australia’s biggest build-to-rent project in the suburb. Dahua, Simonds and Spotlight are also developing apartment projects in the suburb.
The 517-517A Chapel Street transaction comes shortly after Fitzroys’ sale of four adjoining freeholds at 587-593 Chapel Street to an investor for $5.825 million, on a very sharp passing yield of 2.9%. Also on an Activity Centre-zoned site, the property is currently leased to tenants Jumi’s Cafê, Bisonte, and Green Cup.
“Melbourne’s shopping strips have shown a remarkable resilience over the past two years,” Kombi said, adding that Chapel Street, South Yarra’s vacancy rate had actually come down during COVID, according to Fitzroys’ Walk the Strip report.
In recent weeks, Fitzroys has sold over $50 million worth of properties within Melbourne’s famous shopping strips. They have also included a $16.2 million sale on Church Street, Brighton, and major deals on Glenferrie Road, Malvern; Glenferrie Road, Hawthorn; and Burke Road, Camberwell.