The Melbourne headquarters of China Southern Airlines at 342-348 Flinders Street.Supplied
Investor Feng Sheng has decided the time is right to offload an 11-level office at 342-348 Flinders Street he bought through his Asia Pacific Hotels group in 2003 for $7.8 million.
The property leased to China Southern is likely to fetch $50 million this time around. It has 5200 square metres of net lettable area.
In addition,a recently refurbished a seven-level office at 1 Bowen Crescent,which runs between St Kilda Road and Kings Way,is up for sale for about $16 million.
The office was previously owned by tech entrepreneur Malcolm Freake who sold it in 2017 for $13.575 million. Both buildings are being marketed by agency CBRE.
1 Bowen Crescent,just off St Kilda Road near the Domain Road interchange,is expected to fetch around $16 million.Supplied
For several years now,owners of B-grade offices have held back from offloading assets despite strong demand. Sales of buildings under $100 million in value have fallen dramatically year-on-year since 2016.
In NSW this year,the sector comprised just 8 per cent of total office stock sold.
Victoria recorded a slightly higher proportion,17 per cent,but nonetheless 2019 has seen a 25 per cent fall in the number of properties under $100 million in value sold,according to CBRE figures.
Political uncertainty,low interest rates and a lack of alternative investment options were inhibiting potential vendors.
"Many owners have been sitting on the sidelines waiting to see how the market would settle,"agent Josh Rutman said."We have seen a chronic lack of office investments brought to market in 2019."
"Only three properties have come to market in the $40 million to $100 million price range this year,whereas six assets in this price bracket were sold during the same time-period in 2018,"he said.
The reticence of vendors hasn't matched investor enthusiasm for the sector.
A smaller 4-level corner office in South Melbourne sold last week through Gross Waddell and Colliers for $10.2 million.
The building at 49-51 Stead Street fetched a yield of 5.45 per cent,equivalent to the tight yields seen in large city buildings.
Another recent metro office transaction was struck on a 6 per cent yield.
Salta Properties sold the Dulux Group office building in Clayton to a first-time Hong Kong-based buyer through CBRE.
The building,which has about 5700 square metres of net lettable area,was speculated to have sold for about $28 million.
Salta developed the office in 2007 as Dulux's headquarters. Dulux shareholders recently approved a $3.8 billion takeover bid by Japanese chemicals giant Nippon Paint.