Melbourne CBD shops change hands on yield below 3pc
A two-level retail property – four shops and a restaurant – on central Melbourne’s Lonsdale Street has changed hands for $32.6 million on a yield below 3 per cent, the latest transaction to highlight the premium in value of bricks and mortar for some investors.
The property at 272-282 Lonsdale Street has been held by a local family for almost two decades after they acquired it for $5.6 million in 2003.
It has been sold to an offshore private investor, with the deal struck on a building rate of $39,914 per square metre. The transaction represents a land rate of $78,958 per square.
“Despite rising interest rates and inflation, the retail sector remains confident as sales continue to outperform market expectations,” said Colliers’ Oliver Hay.
“As we leave the pandemic behind, location is more important than ever, when we’re seeing a rapid spike in customers returning to physical stores.”
Mr Hay and Colliers colleagues Leon Ma, Daniel Wolman and Matt Stagg, along with JLL’s John Rutman, Nick Peden and Mingxuan Li, were the selling agents for the property. It received eight bids from local and international investors.
Adding to the attraction of property is its underlying land – it stands on a 413-square-metre site, which provides plenty of scope for redevelopment. The leases for the buildings’ six tenants allow for vacant possession by 2027.
While that redevelopment potential boosts value, the Lonsdale Street transaction is also one of a number of retail property deals in the past year struck on very tight yields.
Last November, a local investor snapped up a new-format Coles supermarket in Melbourne’s inner suburbs for $24.5 million on a yield of just 1.9 per cent.
Earlier this month, supermarket giant Woolworths bought a small suburban Sydney retail centre, in which rival Coles is the main tenant, for about $68 million, on a yield well below 3 per cent.
