Family banks $9.2 million selling Melbourne CBD shop after 70 years

A Melbourne CBD shop held by a local family for 70 years sold at auction today for $9.2 million.

The opening bid for the double storey investment at 273 Swanston Street was $6.5 million.

Eight suitors contested.

The result values every square metre of building area at $70,769 – which CBRE marketing agents Alex Brierley, Julian White, Nathan Mufale and Chao Zhang said is a record for the city.

Each sqm of land was priced at $82,882.

The deal was struck on a low net yield of 2.13 per cent.

Occupier, noodle house, New Tapei, is on a lease with fixed annual four per cent increases.

“This is a great sign of confidence in the commercial property market, to have that many bidders compete for the property, and to set a record building rate in the Melbourne CBD,” Mr White said.

Site has foot traffic: agents

Adjacent to QV, 273 Swanston Street is next door to the McDonalds outlet on the south west corner of Londsale Street.

An average 28,000 pedestrians pass the site daily, CBRE said.

Emporium Melbourne and Melbourne Central, with its train station, are within 200 metres.

Another rail depot, part of the $11 billion Melbourne Metro Tunnel project, and to be known as State Library, is under construction two blocks away.

GPT has earmarked to build a 12-level timber office at nearby 300 Lonsdale Street.

Mr Brierley said retail investments in the street are tightly held.

“Swanston Street has long been regarded as Melbourne CBD’s most highly desirable…street of property ownership and this is truly a once in a lifetime opportunity.

“Over the past five years, Swanston Street has been transformed from a retail strip to food and beverage destination catering to Melbourne CBD’s booming student population,” he added.

“Recent lease deals to hospitality operators have been struck at rentals of about $6,000 per sqm, per annum.

“In a landmark deal, the [113 sqm] former Jack London retail store at 301 Swanston Street was leased to popular chain David’s Hot Pot for approximately $400,000,” Mr Brierley said.

The marketing agents added that the 111 sqm 273 Swanston Street plot has development prospects – be it by activating the rooftop of the existing building, or constructing additional levels into the airspace.

The asset contains 130 sqm of lettable area.

How low can Melbourne CBD retail yields go?

The 273 Swanston Street deal is further proof investors will drive down yields for well located Melbourne CBD retail property.

In January, a double fronted two storey shop at 384-386 Bourke Street – half a block from Bourke Street Mall – traded for $22.5 million, a deal which also reflected a sub-3 per cent return.

Five months ago, a warehouse-converted retail and apartment building at 60 Hardware Lane, part of the estate of master jeweller Gary Bradley, traded for $4.8 million – a 2.9 per cent yield.

Last June, the three level 197 Londsale Street, rented to Greek restaurant Tsindos, a long-time occupier, sold on a 1.29 per cent yield.

The Chinatown building tenanted to Shark Fin House also exchanged mid-last year – the Malaysian buyer striking a 3.6 per cent return for his $14.5 million outlay.

Again at that time, a three level retail investment at 22-26 Corrs Lane traded for $6.85 million, reflecting a 3.3 per cent yield.

Several city shops have sold at yields in excess of 4 per cent recently, however.

In late 2018 developer and investor Jeff Xu offloaded a portfolio of five shops at the then-new 76-storey Victoria One apartment building at 462 Elizabeth Street.

Based on the total return ($750,000), that $13.615 million transaction was sealed on a blended 5.5 per cent yield.

Also about 15 months ago, retail investments on the ground floor of other new residential towers, at 410 Elizabeth Street and 398 Elizabeth Street, were disposed of at returns of c4.5 per cent.

On 111 square metres of land, 273 Swanston Street contains 130 sqm of lettable area over two floors and returns annual rent of about $200,000.
The property is adjacent to QV and next door to the McDonalds restaurant at the south west corner of Lonsdale Street.

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Marc Pallisco

A freelance property analyst and journalist, Marc is a co-founder of realestatesource.com.au.

Marc Pallisco