The nine-storey office block at 411 Collins Street with net lettable area of 3015 square metres has sold for about $30 million. Photo: Supplied

Alibaba’s Australian office changes hands for $30m

Michael Bleby|3 hours ago

The Australian office of e-commerce giant Alibaba on Melbourne’s Collins Street has changed hands – at a 25 per cent discount to the price it last transacted at four years ago, when interest rates were at record lows and enthusiasm for office assets was returning.

The nine-storey office block at 411 Collins Street with net lettable area of 3015 square metres sold for about $30 million according to market sources, well below the $40.5 million vendor Peachtree Capital paid in early 2021.

The nine-storey office block at 411 Collins Street with net lettable area of 3015 square metres has sold for about $30 million.

JLL agent Josh Rutman, who marketed the building with colleagues Nick Peden and Mingxuan Li, declined to confirm the price, but said the result close to $10,000 per square metre showed the beleaguered CBD market was bottoming out in the city hardest hit by COVID-19 restrictions and the adoption of flexible working practices.

“We’ve taken a bit of a battering,” Mr Rutman said. “It sold for more than what most people in the market thought it would go for.”

The building was 65 per cent leased, with Alibaba occupying a full floor, Mr Rutman said. Other tenants are proptech company Buildxact, legal software provider Plexus, workplace provider Axiom, architect Hames Sharley and private equity firm Stonehouse Corporation.

The average floor size of the building, which has undergone a $6.2 million upgrade since 2021, is 374 square metres.

The Melbourne office market has been suffering. Data from provider MSCI shows values in the CBD have fallen 21.2 per cent since September 2022 – significantly more than the 14 per cent decline suffered during the global financial crisis – and the relative lack of transactions makes developing pricing metrics difficult to confirm.

But deals are happening. Last month Dexus sold 425 Collins Street to investor group OneEast Capital for about $40 million, a discount of about 20 per cent from its peak.

At a time of high borrowing and construction costs the so-called replacement costs of developing new office accommodation are holding back new developments.

Developer V-Leader last month abandoned $1 billion-worth of planned office and mixed-use projects in the CBD and fringe suburb of Collingwood, as have developers including APH Holdings and Michael and George Argyrou.

In such an environment, some vendors are keen to test the market, counting on high replacement costs to make their existing buildings more attractive.

Institutional investor AFIAA has put up for sale a nine-floor office building with 10,271 square metres of net lettable area at 525 Flinders Street with a guide price of $50 million, making a $5 million discount on what the Swiss investor paid for it in 2013.

The nine-storey, 10,271 sqm net lettable area office building at 525 Flinders Street in Melbourne.

The 42 per cent leased building that needed little updating could also be converted to a hotel or residential, said Cushman & Wakefield agent Daniel Wolman, who is marketing the building with colleagues Nick Rathgeber, Leigh Melbourne, Oliver Hay and Leon Ma.

“The only things that are working at the moment are existing buildings because replacement costs are so high,” Mr Wolman said.

“You can’t build for that any more. The only challenge is it’s been vacant because the Melbourne market hasn’t bounced back since COVID.”