Parkside Gisborne office bucks downturn forecast

Earlier in the week, an office building at 289 Wellington Parade South, East Melbourne, sold for almost $52 million – substantially less than its original $60 million asking price.

Rising interest rates are expected to chip away at commercial property values in the new year, with yields – the barometer of value – edging higher. Lower yields indicate stronger capital values.

The three-storey Gisborne office, at 15 Goode Street, is opposite the botanic gardens on an 8000 square metre land parcel.

The 7552 sq m building is anchored by a lease to Suncorp, which runs its AAMI call centre out of the building. The Country Fire Authority, Bendigo Bank and the state government are also tenants.

It is about 85 per cent fully leased, and the deal reflects a soft passing yield of 7.06 per cent.

The property was developed in 2008 by the vendor. Records show the buyer was the Bradica family, who purchased the site on a short settlement period.

CBRE agent Scott Orchard, who negotiated the deal with Tom Ryan, said: “This is our third $20 million-plus office sale in six weeks, after a period of investor inactivity mid-year”.

“One common thread between this sale and the others we’ve negotiated is that they have a strong replacement cost story. This is heightening the appeal of certain assets due to ongoing supply chain and increased construction cost challenges,” Ryan said.

Ducati sale

The Ducati showroom in South Melbourne has been sold for about $5 million, representing a yield of about 4.5 per cent.

The Sydney-based owners of the Ducati business appear to have taken a minor haircut on the deal. Records show they bought the property at 150-158 Montague Street in 2017 for $5.72 million – at what was then the peak of the market.

It first went on the market in May 2021 and was relisted later that year before recently selling off-market through Colliers agents Daniel Wolman, Oliver Hay, Leon Ma and Alexander Leggo.

A local investor snapped up the showroom on a 27-day settlement period.

Ducati’s five-year lease on the property started at the beginning of this year. Rent is about $250,000 annually.

The showroom sits on 767 sq m and has Capital City 1 zoning, under the Fisherman’s Bend redevelopment plan.

Inner-north deals

There has been a swathe of deals in the $5 million to $6 million range in the inner-north.

An owner-occupier has purchased 137 Church Street – on the corner of Somerset Street – Richmond for $5.75 million. The deal, brokered by Teska Carson’s Reece Israel and Michael Ludski, sold at a land rate of $9955 a sqm and a building rate of $7297 a sq m.

The 764 sq m former warehouse is on a 560 sq m lot and has undergone a significant refurbishment and renovation since its last sale. It was part of a 1021 sq m property that sold for $2.25 million in 2019 and had historically operated as a warehouse for the Hudson’s Stores hardware business at the top of Bourke Street.

Also selling at the same level was a row of shops at 726-732 Nicholson Street, North Fitzroy.

A land-banking developer paid $5.6 million for the 463 sq m site, which is next door to a bus depot.

Fitzroys’ Chris Kombi and Ervin Niyaz sold the property, which is zoned Commercial 1 and could bear a four-to-six level development.

Centennial buy

Fund manager Centennial has paid $19.8 million for a huge warehouse in Dandenong South in an off-market sale. The 9304 sq m building is on a 17,480 sq m site at 20-50 Waterview Close, near the South Gippsland highway.

There is a three-year leaseback deal to Apack, a company that supplies goods to flower and plants retailers.

The deal was negotiated by Knight Franks’ Scott Braithwaite, who said: “We have seen slowing of transactional volumes following a number of interest-rate rises. The debt markets are volatile and having an impact on the saleability of certain industrial assets.”

Still, industrial property is expected to weather a looming values crunch better than other sectors, mostly due to constrained supply and restructuring distribution networks.

In nearby Keysborough, a 16,065 sq m warehouse was quickly leased before it hit the open market.

Global paper and packaging supplier Spicers is understood to be moving into the warehouse at 150-168 Atlantic Drive, paying a yearly rent of more than $1.5 million. It is the biggest leasing deal done for an existing property in the south-east this year.

The warehouse, which is on a 27,272 sq m site owned by Frasers, is close to Spicers’ headquarters on Logis Boulevard, Dandenong South.

The deal was struck by Colliers agents Gordon Code and James Stott.

Colliers research shows vacancy rates in the south-east are less than 0.05 per cent, and prime rents have grown 19.4 per cent over the past 12 months.

The Colliers team, including Fraser Pearce and Daniell Telling, has listed another smaller vacant A-grade warehouse in Dandenong South, with expectations of more than $19 million.

Raw plastics manufacturer Ampaset is selling its 7093 sq m facility at 32-44 Rodeo Drive.

“It is the first time this year that we’ve seen an opportunity like this being brought to market in the south-east,” Code said. “The area is experiencing a systemic undersupply of buildings with access to significant power capacity and functionality.”

Pharma empire

Chemist Warehouse has swooped on a property it leases at 415-417 Springvale Road, Forest Hill, paying $2.72 million.

The pharmaceuticals retailer has leased the 341 sq m shop since 2007, and recently renewed it for another five years. Annual rent is $87,915.

Gray Johnson agents Rory White and Matt Hoath manged four bidders at the property’s auction on Wednesday, with the Chemist Warehouse representative coming up trumps. The deal reflects a yield of 3.1 per cent.