A Macau-based private investor has pre-purchased an office development in Ringwood for $28,300,000 in a sign of the continued strength in Melbourne’s suburban office market.
The 60-62 Maroondah Highway project is 100% pre-leased to the Victorian Government on a 12-year term.
It is being delivered by a joint venture between renowned builder/developer Pellicano Group and investment manager/developer Camlen Property Group, with completion anticipated in May 2020.
The circa 850sqm site currently comprises two single-level retail buildings. Factoring in the office development proposal, the sale price reflects a fully leased initial yield of 5.30% and a building rate of over $8,500/sqm.
Renato Pellicano of Pellicano Group said; “It has been fantastic working with the government on fulfilling their accommodation needs and we are very excited to deliver another quality project for them.”
Jamus Campbell of Camlen Property Group added; “Pellicano has been a great joint venture partner to work with. It is very pleasing to see 24-months work come to fruition and we hope to continue working with the government to deliver additional building in the coming years.”
CBRE’s Josh Rutman said the result was a clear demonstration of the appetite for suburban office investments in Melbourne.
“Buyers are focusing on tenancy covenants and lease tenure and have demonstrated a willingness to push pricing to new heights to secure the right opportunities,” Mr Rutman said.
“We expect to see similar take-out or fund through deals in 2019 as suburban tenants continue to pre-commit to new buildings ahead of existing lease expiries to provide their staff with customised office accommodation.”
The Ringwood campaign generated nine bids from domestic and international investors, with four groups contesting the second round – resulting in an unconditional sale agreement.
Lewis Tong, National Director of CBRE’s Asian Services Desk, said the bidding highlighted a continued shift in focus by Asian capital domiciled in Australia from residential development projects to commercial investment deals.
“Capital is recalibrating as the market changes and we expect the interest in office investment opportunities to continue well into 2019, particularly after Chinese New Year,” Mr Tong said.
Andrew Dawkins of Dawkins Occhiuto said the project’s location in Ringwood – one of only nine Metropolitan Activity Centres in Melbourne – had been an investor drawcard.
“The Ringwood activity centre has experienced significant change over the past two years, with exponential population growth spurring investment by organisations such as Costco and QIC,” Mr Dawkins said.
“The sale result sets a new benchmark for a long WALE asset in suburban Melbourne, surpassing the 5.4% yield set by Cedar Woods for 107 Overton Road at Williams Landing.”