Local vs offshore in Melbourne CBD as buyers fight for strata office, retail: Colliers

Mum-and-dad private investors are competing with offshore buyers for strata office and retail shops in the Melbourne CBD, helped by the low interest rate environment.

Colliers International’s senior executive Oliver Hay said the current appetite for strata investment assets in the CBD, both offices and small retail investments, would continue to grow amid record low interest rates and strong competition.

“Of the last seven strata deals facilitated by Colliers in the last two weeks, half of these assets have been sold to local purchasers and half to those from offshore or with offshore interests,” Hay said. 

“This insatiable appetite for strata assets is driving a spate of sales and new listings as local and offshore buyers compete.”

Recent deals have included:

• Level 2, 24 Albert Street: A 195sqm office suite purchased by a private local investor for $760,000.
• Level 6, 24 Albert Street: A 225sqm office suite purchased by a local owner-occupier for $825,000.
• Suite 4.04, 838 Collins Street: A 78sqm office suite purchased by a private interstate investor for $560,000.
• Mezzanine level, 58 Franklin Street: A 347sqm office suite purchased by an offshore investor for $1,325,000. 
• Shop 2, 2 Queen Street: 70sqm of retail space purchased within two days on market by an offshore investor for $1.5million.
• Shop 2, 377 Lonsdale Street: A 130sqm retail suite purchased by a local investor for $1.82million.
• Level 8, 21 Victoria Street: A 320sqm office suite purchased by private local investor for $1.75million.

Colliers International’s David Sia said the current activity was being fuelled by a perfect storm of market conditions including strong international demand, record low interest rates, a weak AUD and volatility in the equities market. 

“We will continue to see yield compression throughout 2016 given the pent-up demand for good office and strata retail in quality CBD locations,” said Sia.

Interstate buyers are also increasingly active in the strata market, with three properties in one week recently sold to this buyer group by Colliers International – Shop 2 at 2 Queen Street and two office suites at 838 Collins Street.

“Off the back of the sale at 2 Queen Street, we will soon be launching another prime CBD strata retail asset at 118 Franklin Street with price expectations of in excess of $2 million.”