Pocket-sized cafe space in Sydney CBD looking for new owner
A tiny cafe on Sydney’s Macquarie Street has hit the market less than three weeks after another pint-sized eatery on the other side of the CBD came close to breaking a city price record.
The strata property at 229 Macquarie Street – currently operating as the well-known Hole in the Wall cafe – which includes a five-square-metre ground-level kiosk, has been listed with Savills Australia with price expectations of $800,000 or more.
The property is currently generating a net annual rent of approximately $60,000. If it sold for $800,000 that would translate to a yield of 7.5 per cent.
“In the CBD trying to find a 7 per cent retail return is almost impossible,” said listing agent Selin Ince, sales executive metro & regional sales at Savills.
By comparison, yields for apartments in Sydney consistently hover around the 3.5 to 4.5 per cent mark.
This follows the recent sale of the Normcore coffee shop opposite Wynyard Park on York Street by Ms Ince and colleagues Nick Lower, director of metro sales, and Tom Tuxtworth, state director – NSW metro and regional sales.
That 14-square-metre property sold to a Sydney-based investor for $1.57 million – which translated to $112,143 a square metre, just shy of what is believed to be Sydney’s record rate of $113,600 a square metre.
The Hole in the Wall shopfront is far smaller than the Normcore shop, but it does come with an ace up its sleeve.
Included in the sale is an additional 38-square-metre commercial kitchen on a separate strata title on the fourth floor of 229 Macquarie Street.
This was where the business conducted its catering business, Ms Ince said.
“They do a lot of catering, a lot of lunches, and especially in the surrounding law courts they have a lot of contracts to provide food,” she said.
Prospective buyers have been attracted to this “intriguing layout” and the prospect of a long term, stable income.
The Hole in the Wall business – which has been in the family for two generations – has 11 years remaining on a lease that includes guaranteed 2 per cent annual rent increases.
“It’s an ‘invest and forget’ type of property,” Ms Ince said.
The property has been held by the current owner – who owns other cafe sites in the city – since 2006 and is now surplus to his needs.
Ms Ince said that the demand created by the current low interest rate environment and scarcity of high-yielding assets in the city meant it was a “great time to sell”, as shown by the Normcore result.
But another trend could add to the competitive bidding come auction day.
Changes to strata regulations in 2016 that reduced the threshold required for strata owners to sell an entire building – to 75 per cent – have seen a spate of ‘strata renewal’ acquisitions in the CBD by major institutional players.
Ms Ince said that 229 Macquarie Street was a prime candidate for a similar move considering its proximity to the legal precinct and Martin Place station, with the prices paid for such a transaction likely to be at a significant premium to market rates.
“It’s not a matter of if but when,” Ms Ince said.
The cafe and kitchen, lots 3 and 34 at 229 Macquarie Street, will go to auction on Friday, October 18.
