VIC MARKET OVERVIEW
VICTORIA
Peter Bremner Director - Melbourne Suburban Office Sales - Gorman Allard Shelton
MELBOURNE SUBURBAN OFFICE SALES MARKET UPDATE . Reflecting on the Melbourne suburban office sale market in 2023, How would you describe the year in terms of activity, buyer and vendor sentiment and what were any underlying trends that stood out? 2023 has seen thew lowest quantum and volume of sales across Melbourne’s suburban office market in a calendar year since 2011 when there was only $142 million of office stock sold. So far in Year To Date (YTD) 2023, only 13 Melbourne suburban office buildings (above $5 million in value) have transacted for an aggregate of approximately $270 million. This compares to the previous decade where the typical year sees some 40-50 office buildings (above $5 million in value) normally transacting in the Melbourne suburban office market and sales volumes usually trend between $1 billion - $1.5 billion. Buyers have been reluctant to commit, even as values fall, as most buyers ideally want to buy when the market has bottomed out or has seen some stability, meanwhile many owners are reluctant to commit to an on-market sale campaign unless their pricing expectations can be met. We are often seeing the vendors and buyers price expectations not marrying up. However, there are many more reasons why office buildings transact other than picking the top or bottom of the market and 2023 has seen a relatively active year from owner occupiers taking advantage of the lack of buyer competition when the property fundamentals are still sound.
On-market transaction volumes seemed to be comparatively lower, but what did you observe in the off-market space in 2023? Transactions were well down in 2023, however 9 of the 13 suburban office sales were via on market campaigns, meaning there was only 4 off market deals. We are finding that most properties generally find a buyer when put up for sale, however the depth of buyers is not as great as it usually is, and the length of sale campaigns has become much longer to consummate a deal. Which asset classes best withstood the market headwinds in 2023 and is likely to continue into 2024? The office owner occupier market stayed resilient in 2023 with 8 of the 13 Melbourne suburban office transactions YTD involving an owner occupier buyer. Away from suburban office, we saw some strong sale results from popular strip retail centres, especially for retail investments under $5 million leased to good covenants like medical, health and food covenants. We see these trends continuing into 2024, despite interest rates remaining relatively high. Can you tell us about some of the biggest transactions in your state in 2023? The largest Melbourne suburban office transaction in 2023 involved Queensland based Garda Capital’s disposal of two office buildings in Botanicca Office Park, Burnley to fellow Queensland based group Sentinel. The two office buildings known as Botanicca 7 & Botanicca 9 at 572-576 Swan Street sold together for circa $80 million, which reflected a capital value rate of just under $6,000/sqm on the total 13,500sqm of office space.
PETER BREMNER
46 – November / December 2023
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