Strong investor demand for retail assets in Melbourne’s CBD has sparked a wave of recent transactions across the city, according to property firm CBRE.
VIC Investments Management Group has sold the ground floor and basement space at its ‘Metropolitan’ development at 137 Bourke Street. An off-shore Asian investor purchased the property for close to $8 million – reflecting a yield of 4.00 per cent.
CBRE said the deal highlighted the growing appeal of Melbourne’s CBD retail market.
“Developers, private investors and even real estate agents are making the most of increased demand from both local and offshore investors,” said CBRE’s Max Ruttner.
In further deals, Directors of Melbourne commercial property agency Fitzroy’s, Peter Weatherby and Geoff Emmett have sold three assets they co-owned, for a combined price of $4.4 million.
“This is a prime example of a CBD vendor taking example of the growth in the CBD and ground floor retail market experienced over the past two – three years,” said Ruttner.
A 300sqm retail shop at 22 Duckboard Place in the Paris End of the Melbourne CBD is one of the first CBD transactions of 2018. Occupied by international tenant A Hereford Beefstouw, the property was originally purchased as an office before being converted into a restaurant. A local private investor purchased the property for $4.35 million – reflecting a yield of 4.5 per cent.
“Restaurants in the East-End of the Melbourne CBD are rarely offered, therefore, when they do come up, they are snapped up quickly by investors. Melbourne’s ‘foodie’ culture allows for these restaurants to trade well, so whether be positioned down a laneway, in a basement or on level one of a building, they are always buzzing and trade well,” said Ruttner.
CBRE Research Analyst, Verity Jenkins, commented on yields within Melbourne’s retail market: “Yields continue to compress for secondary retail assets, with anything being sold in the CBD generally achieving a sub-5 per cent yield. Assets sold with food and beverage tenants are attracting the most demand and the lowest yields.”
The next asset to test the strength of the market will be 15 Collins Street – a 230sqm retail property leased to popular hospitality operator Uncle Restaurant – voted as one of Victoria’s top 100 restaurants in 2017.
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