454 Collins Street, Melbourne

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Sydney-based businessman Robert Christie has offloaded a Collins Street building occupied by his flexible workspace business Christie Spaces to a Macau-based investor for $40.1 million.

The 11-storey office at 454 Collins Street on the corner of William Street was fully leased to Christie Spaces for 10 years and sold on a 4.24 per cent yield.

Mr Christie paid $17.8 million for the building at an auction in December 2007 at the height of the last property cycle.

“We don’t part with our real estate lightly as we know how hard these properties are to find, but the offers brought forward during the campaign were simply too good to refuse.

“The Melbourne market has come a very long way in this current cycle,” he said.

CBRE’s Josh Rutman, who negotiated the sale with colleagues Kiran Pillai, Mark Wizel and Lewis Tong, said the property attracted 14 bids from local investors and others from Singapore, Malaysia, Germany and Hong Kong.

Peter Bazzani of BSP Lawyers represented the purchaser in the transaction.

Office capital values had reached a new benchmark.

“This transaction confirms a doubling of values versus those that were achieved for similar assets as recently as 2013,” Mr Rutman said.

Flexible workspace offerings have grown rapidly across Australia’s eastern seaboard with local operators like Christie Spaces and The Hub competing with big internationals like WeWork and Spaces, intent on dominating the market.

The Christie building is opposite Cbus Property’s Collins Arch mixed-use development, which will be tenanted by lawyers King & Wood Mallesons, HWL Ebsworth and Gadens, and have Melbourne’s first W Hotel.

Melbourne’s rosy office market outlook has been underpinned by a lack of new buildings.

Vacancy rates have plummeted across the city to decade lows as landlords scale back leasing incentives and rents grow strongly.

Investors have responded by pushing yields down and prices up.

“Some are concerned that the upswing in prices has run its course,” BIS Oxford Economics researcher Maria Lee said, but BIS did not share that view.

CBD offices were fairly valued but non-CBD assets were considerably undervalued. “We’re looking at a prospective five-year IRR of around 10 per cent on average across Melbourne’s non-CBD office markets,” she said.

THE AGE – 25th April 2018 – Commercial Real Estate – Simon Johanson