303 & 307 Harvest Home Road, Epping
The two strata-titled assets within Lendlease’s Aurora Village sold for a combined $1.8 million and at an average yield of 5.4%. 303 Harvest Home Road has a 10+10-year lease to Harvest Pizza and Pasta, and 307 a 5 year lease to Aurora Butchers. Both properties are currently returning $49,400pa.
320 Bluff Road, Sandringham
A local investor bought the 160sqm single-storey building, on a 220sqm site, for $835,000 at a 5.3% yield. It is leased to a dry cleaners on a 5+5-year term from August 2017 and returns $45,190pa.
Shop 3, 379-381 Whitehorse Road, Balwyn
An arts and crafts tenant signed a 4+4-year lease over the 94sqm space at $53,000pa with 3% annual increases.
220 Ingles Street, Port Melbourne
Online wine retailer Vinomofo leased the 731sqm office on Level 1 at $400/sqm net. The former soap factory has commercial and residential space and is on the former office site of Kitchen and Sons Pty Ltd, established in the 1850s.
650 Chapel Street, South Yarra
Utilibill leased a 306sqm office on Level 10 for 3 years at $550/sqm.
48-50 Charter Street, Ringwood
Zoned Commercial 3, the vacant 1,895sqm site with a 1,208sqm building and value-add potential sold to an expanding local business for $4 million.
3 Cummins Drive, Somerton
An owner occupier paid $750,000 for the 600sqm office and warehouse.
19-23 Industrial Drive, Sunshine West
Glass-reinforced concrete manufacturer AUGRC leased the 2,900sqm office and warehouse, on a 5,400qsm site with multiple overhead and jib cranes, for 5.5 years at $250,000pa net.
4 Norfolk Court, Coburg North
A plumbing contractor leased the 604sqm warehouse on a 2+2-year deal at $45,000pa net.
104 Robjant Street, Hampton Park
Telstra sold the ready-to-develop 1,122sqm site to a local residential developer/builder for $460,000.
Office Demand Evolving in New Landscape
Demand for office space will present itself in different ways during the COVID-19 pandemic and beyond, reflecting the enduring attraction of a workplace as a space for collaboration and interaction.
“As a result of the changing working and market environments, many companies are reassessing their office space utilisation,” Fitzroys Agency Associate, Stephen Land said.
“This is in response to observing the ability of staff to effectively work from home, and as a result they are generally now more open to flexible office arrangements moving forward.”
Land said there has been greater enquiry and activity within the CBD fringe and inner-suburban markets in recent months, with multiple factors at play.
“Tenants within the CBD or the immediate fringe, in locations such as Southbank, St Kilda Road, and Docklands, are considering moving their office closer to home, making it easier to access, particularly if time allocated to the office during the week is more flexible.
“Companies moving to the inner suburbs or metropolitan locations may seek to remain in the same amount of space, or perhaps even more to accommodate social distancing spaces, but are able to pay a more competitive rate per sqm than that of the CBD.”
He said enquiry for offices in locations such as Hawthorn has increased for this reason, while some tenants wanting to remain in central locations have sought space in Fitzroy and Collingwood.
“This demonstrates that the concept of the office remains important for workers - that being able to have a devoted space away from home that allows for sharing ideas and social interaction is still desired, not just from an economic and production perspective, but a lifestyle perspective, too.”
In the CBD, Property Council of Australia data shows Melbourne’s vacancy rate was 5.8% at the midway point of the year, up from a historical low of 3.2% at the beginning of 2020. The rise can be attributed an historically high introduction of stock to the market, although a large proportion of those new projects are pre-committed.
Major completions during 2020 have taken Melbourne, by some measurements, to now be Australia’s biggest CBD office market.
Among the newly completed projects are Cbus Property and ISPT’s Collins Arch at 447 Collins Street, and Mirvac and Suntec REIT’s Olderfleet building at 477 Collins Street; and in the Paris End, a new office tower within Dexus’s 80 Collins Street and 130 Lonsdale Street, part of Charter Hall’s Wesley Place.
Cbus Property and Keppel REIT’s Victoria Police Centre at 311 Spencer Street, and Two Melbourne Quarter, part of Lendlease’s Melbourne Quarter at 697 Collins Street, have also reached completion. A vast majority of this new space is pre-committed.
Land said that we could see a shift of tenants within large high-rise towers looking to relocate to more social distancing-friendly buildings, or lower-rise boutique offices with less tenants. This could include larger office occupiers of circa 500sqm to 2,000sqm relocate from the CBD to a self-contained building or floorplate within the CBD fringe.
“However, there are tenants that are willing to take up office space across the CBD, who find the centralised location more beneficial for staff movement,” he said.
“Within our stock list, we are seeing most of our immediate activity being sub-500sqm, and there remains an ongoing desire within the market for boutique and character space.”
Fitzroys Agency Manager, Sam Friend said existing fit-outs are being highly sought-after in the current climate.
Union Quarter Construction Kicks Off
Construction has kicked off at one of Australia's largest privately developed build-to-rent projects, the $275 million Union Quarter development in Spotswood.
The project is being developed by Suleman Group on a 2ha site at 31-69 McLister Street. It will comprise 335 apartments, including 34 NDIS dwellings, as well as a neighbourhood activity centre across the lower levels with 7,622sqm of retail and 1,136sqm of health and fitness space anchored by a Woolworths supermarket, and with a Dan Murphy's, specialty retailers, food and beverage, and a town square.
Rick Berry, James Lockwood and Bianca Pannunzio of Fitzroys are marketing the retail and medical component of Union Quarter. Fitzroys is currently running an Expressions of Interest campaign for the pharmacy premises, and will soon move onto the next stage of the retail leasing program. This will include targeted marketing of the medical centre and 2-level café and restaurant offer that will anchor the food and beverage component of the project.
“Melburnians are embracing their local communities even more in the current environment. Union Quarter Activity Centre will offer a comprehensive shopping and lifestyle hub for residents, and a focal point for the next phase of growth in Melbourne's inner-west,” Berry said.
“Union Quarter Activity Centre meets changing demand from this local community in Melbourne’s inner-west for a purpose built high-quality shopping and lifestyle offering, and hundreds of new retail job opportunities.”
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 2020 Fitzroys.