Collins Street kicks goal in fourth quarter

A local investor has snapped up 406 Collins Street for about $30 million, marking the prestigious office strip’s first transaction of the year.

It has taken until the fourth quarter to get a Collins Street deal done. The agreement pips the sale of Mirvac’s 367 Collins Street, which has been bogged down since April while the buyer raises capital.

406 Collins Street attracted offers from local, interstate and offshore investors.

It has been a lean year for Melbourne CBD office transactions, with potential buyers pitching lowball prices to vendors, which are starting to crystallise 10 to 15 per cent falls in property values.

Vacancy rates are running at more than 15 per cent, with many workers still toiling at home and the absorption of new office space leaving some buildings empty.

MSCI’s half-year Capital Trends report notes Melbourne’s $643 million in office sales is 73 per cent lower than in 2022 – and that figure includes the entire city, not just the CBD.

Nationally, office deals worth around $3 billion were recorded in the first half of 2023 – down 73 per cent on 2022 – with overseas investors falling away and private investors making up nearly half of all buyers.

The biggest deals in the Melbourne CBD have been 333 Queen Street, which private investor Jimmy Goh purchased last month for $35 million, and 99 Queen Street, which fetched $30 million in April.

Outside the CBD borders prices have been better. Private investor Harry Stamoulis is understood to be paying Charter Hall about $155 million for Orica House at 1 Nicholson Street – a discount of nearly 10 per cent. And Japanese investor Daibiru will pay Mirvac $315 million for a half-stake in 7 Spencer Street, a 45,000 square metre office building under construction.

Still on the market is 385 Bourke Street, a 42-level office building owned by Dexus and the Canadian Pension Plan, which has a book value of around $760 million.

The sale of 406 Collins Street was handled by Cushman & Wakefield’s Daniel Wolman, Oliver Hay and Leon Ma, and MMJ’s Joel Wald. The agents all declined to comment on the sale price.

The vendor, a private investor, paid $23.1 million for the 3861 sq m building in 2016 on a 4.43 per cent yield.

While the building has undergone substantial refurbishments in the past 10 years, the local buyer will likely have to pump more money into it to attract new tenants.

Wolman said 11 offers were made for the property from local, interstate and offshore investors. It is on a 411 sq m site, giving it a land value of about $73,000 a sq m.

Originally built in 1958 and designed by H. Garnet Alsop, the building has a curtain-wall glass facade, and is listed as “significant” under the Melbourne Planning Scheme.

Other CBD deals this year, also done by Cushman & Wakefield, include 189-191 Lonsdale Street, bought by a hospitality operator for $9.1 million, and 144-148 A’Beckett Street, bought at auction by a private education provider for $11.85 million.

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