Mars Group hits sell on St Kilda Road office block

Bargain hunters are expected to be out in force for a Melbourne tower as Mars Group exits the city’s market.

The building at 420 St Kilda Road, Melbourne.

Hong Kong-based Mars Group has put 420 St Kilda Road back on the block, hoping that it can offload the office tower for about $55m to an investor willing to be on the recovery of the famed Melbourne boulevard.

While a series of buildings in the sub-market have been hit by vacancies and others have fallen to apartment or build-to-rent developers, the office block is considered a strong performer.

The offer is also tipped to appeal to counter-cyclical buyers that have emerged for office blocks as they are willing to reposition assets and then capitalise on the market recovery.

Mars Group paid $98m for the building in 2019, so the shift in values as Melbourne troughs is also on display. The company, associated with Hong Kong’s Mai family, followed up by buying the neighbouring 424-426 St Kilda Road for about $70m that year.

Developer Tim Gurner picked up that site for about $80m and unveiled plans for an $800m luxury scheme. But the No.420 offer is focused on office investors.

The A-grade block, known for its distinctive reflective glass facade, comprises 10,435sq m of net lettable area across 11 levels with 131 basement and at-grade (above ground) car parks.

The property is being offered via Trent Preece, Tom Ryan and Alice Crowley of Knight Frank and Tim Carr, Mingxuan Li and Josh Rutman of JLL.

It is 300m from the soon-to-open Anzac train station. The building is more than 80 per cent leased, with a weighted average lease expiry of about 2½ years and a fully leased net passing income of almost $6m.

Mr Preece said while the asset was previously marketed in 2023 amid heightened economic uncertainty, improved conditions had shifted buyer sentiment. “With inflation now under control and a positive interest rate outlook, we are seeing increased buyer depth and appetite,” he said.

Funds house Bayley Stuart swooped on nearby 468 St Kilda Road for $42.55m and said this month it would put it into its boutique multi-asset fund. It bought the building from the listed Australian Unity Office Fund.

Mr Preece said the recent sale was the largest office transaction in Melbourne so far this year, and the first major investment sale along St Kilda Road in over three years, signalling renewed investor confidence.

Mr Carr highlighted the building’s recent leasing success after a refurbishment, floorplates size of about 1000sq m that subdivide easily, and the prime location. “We’re seeing tenants actively upgrading within the precinct and are gravitating toward buildings like 420 St Kilda Road that offer superior office accommodation within immediate proximity to the new train station.”

The site could also be redeveloped in future.

Mingxuan Li from JLL also highlighted that 420 St Kilda Road was poised to attract Asian capital, including local, interstate and offshore investors. “The office market has re-emerged as a focal point for Asian investors. Asian capital views the current cycle as an opportune time to re-enter before the office sector inevitably recovers,” he said.

Last year two major Asian developers, Gamuda Land and Sunnyland Investment Development Group, began construction of their new St Kilda Road projects.