A small freehold on Melbourne's Bourke Street has gone up in value by 50 per cent after it sold to a local investor for $22.5 million.
The freestanding, three-level building on 384 Bourke Street, occupied by OPSM, is expected to be vacated early this year and fitted out for a new restaurant by hospitality operator Eddie Muto.
The sale was struck on a tight 2.6 per cent yield with a new lease arrangement, starting at $586,275 per annum with limited rental increases throughout the duration of the 10-year lease term.
The 1,047sq m building had only a limited frontage of 10 metres to Bourke Street, with the result equating to a building rate of $21,482/sq m and $47,771/sq m land rate.
Ten offers were received for the property—with a strong mix of local and Asian backed investors—by CBRE’s sales team Mark Wizel, Julian White, Chao Zhang and Nathan Mufale.
White said this result demonstrated current investor confidence in Melbourne CBD investments.
“The compressed yield highlights that investors are banking on further interest rate cuts to create a greater yield spread between rentals and acquisition costs,” he said.
“Investors are also hunting for trophy assets and are less phased by immediate rental returns given the CBD’s strong underlying market fundamentals.”
Zhang said there is a big interest in the Melbourne market from international buyers.
“The depth of interest from Asian bidders, including a number of parties who are new investors to Melbourne, was a very exciting feature of this campaign,” he said.
“Whilst the buyer has other properties holdings here in Melbourne, there was strong bidding from groups that have yet to buy here before.”
The property was last purchased by investor M&M Assets—controlled by Bak Hoe Goh and Bee Hoon and Yok Yeong Loh—in late 2015 for $15 million.