Melbourne building sales grind to a halt as funding becomes “complicated” to acquire
157-159 Swanston St, Melbourne is for sale.
Melbourne CBD building sales have virtually halved as rising interest rates make getting funds “a lot more complicated”.
JLL head of Melbourne CBD sales Nick Peden said just 13 freehold buildings had sold in the past 12 months, down from 24 in the two years prior, respectively.
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“We’re almost 50 per cent down on transactional activity year on year; but I’d say full year, you could probably put a circle around maybe 18, 19, 20,” Mr Peden said.
“And we’re still going to be 25-30 per cent down on the norm.”
While this was partly because owners weren’t motivated to cash out of owning a building in the city as the market had rebounded since the pandemic, Mr Peden said it was also because of the slowdown in larger office building transactions.
He said acquiring capital to buy those types of assets was “a lot more complicated” than what it used to be largely due to increased interest rates.
“Also the vacancy rate has increased within the city for office buildings and the office occupancy is down a little bit since Covid,” he said.
“Yields have naturally gone up for those larger buildings.”
He added that owners weren’t able to sell these buildings for what they thought they were worth. Rather than sell for a loss, they were choosing not to list.
Melbourne office buildings have slowed in sales.
But Mr Peden said freehold buildings, especially for retail, were “bulletproof” investments and he was “really bullish on the CBD”.
“We expect it to grow,” he said. “It’s not going to be significant this time next year or the year after, but I think in the next five to 10 years, I think that the growth is going to be pretty significant.”
The lack of others selling has prompted the owners of a three-level building on one of Melbourne’s busiest streets to list the property after more than 30 years, with expectations it could make $14m.
Home to an EzyMart and pizza joint Rozzis, the fully-leased property at 157-159 Swanston St is one of just six freeholds in the precinct to be listed in the last decade.
The two shops collect $585,905 in rent a year.
Spanning 502sq m, the building is also comprised of two upper floors and 10.5 metres of Swanston St frontage.
Mr Peden said it was a family decision to list the property and it was a “good time to sell” because there wasn’t a lot on the market.
“That scarcity factor is real, particularly for Melbourne CBD real estate, and also for Swanston Street freehold properties; there’s not a lot of opportunity to buy,” he said.
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sarah.petty@news.com.au
