GE Real Estate to Sell 553 St Kilda Road

The 7-level, 10,953 square metre A-grade building, near the Chevron redevelopment, backs onto Fawkner Park and was acquired by GE for $28.5 million in July 2000.

By comparison, the property is expected to fetch between $40 million and $45 million this time around, according to selling agent CB Richard Ellis executive managing director – institutional property group Mark Granter, and Mark Costa.

Assuming the building is fully leased, this would equate to a yield of about 8.75 per cent.

The asset is the second in Melbourne to be put up for sale by GE this year. Earlier this month, it listed for sale 90 Collins Street in the city, which it bought in December 2007 for $139 million, on a low yield of 5.8 per cent.

The jury is out as to whether GE will recoup that same amount in the current market, where CBD office yields have risen to an average of about 6.5 per cent.

Elsewhere on St Kilda Road, a Perth-based private investor is understood to be in due diligence to buy the 570 St Kilda Road office building, across the road from #553.

Sources say vendor AMP Capital Investors accepted an offer of about $28.4 million for the 8-level, 7,700 square metre building, which would equate to a yield of about 9 per cent.

Colliers International managing director – investment saes John Marasco confirmed the building was in due diligence when contacted by The Age, but declined to elaborate on any terms.

A deal at 570 St Kilda Road follows other St Kilda Road office sales struck over the past six months.

Major sales include # 441 which sold to Dexus Property Group for $65.5 million, # 436 which sold to Flight Centre for $31.3 million, # 420 which sold to private investor Yong Quek for $40.35 million, and 312 St Kilda Road which sold to the Myer family for more than $50 million.

The strength of the investment market has a lot to do with the strong leasing market, local agents say.

According to the Property Council of Australia, office vacancy levels in St Kilda Road fell to 6.2 per cent in January 2008, down from 10.4 per cent a year earlier.

Knight Frank leasing executive Peter Soumilas said a further 2000 square metres of St Kilda Road office space has been absorbed in the past month with a number of businesses either moving to larger premises, while others are committing to more space in the same building.

Communications company PeopleStream has taken 350 square metres at 474 St Kilda Road, while engineering and infrastructure management services group Downer EDI has taken an additional 522 square metres at 468 St Kilda Road.

Financial adviser Aviva Australia has expanded by 460 square metres the amount of space it occupies at 509 St Kilda Road.

Mr Soumilas says this year alone almost a third of existing St Kilda Road tenants occupying between 500 and 2000 square metres of space, have leased more space to accommodate expansion.

Lemon Baxter director – commercial sales and leasing – Chris Curtain, says new lease deals and lease renewals of more than 4000 square metres have been negotiated at the Fawkner Centre, at 499 St Kilda Road.

He said interactive marketing communications company Blue Freeway has leased 650 square metres at OCE House at 616 St Kilda Road, where it will continue to share a building with major tenant AAMI, which has signed on to stay at its 6000 square metre office.

Other major tenants to commit to space in the precinct include Telstra, Healthscope, L’Oreal, MAB, Seek and Oracle.

Mr Curtain says buildings with good views, natural light and adequate car parking always lease well.

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of