Retired advertising veteran Harold Mitchell has sold a premium-grade South Melbourne office for $49 million – nearly 10 per cent over price expectations.
Emerald House, at 105 York Street (pictured top, left and bottom), was built in 2010 to accommodate Mr Mitchell’s business, Mitchell Communications Group.
It is now fully occupied by Japan’s Dentsu Aegis Network, which bought Mr Mitchell’s business more than eight years ago. Dentsu’s lease expires in 2021 (it currently has a requirement in the marketplace seeking 12,000 square metres in one building which would consolidate several tenancies).
On a 1392 sqm block, the five-level, 5101 sqm “state of the art” building, with 112 basement car parks, has a four-star NABERS energy rating.
Marketing agency CBRE confirmed the sale today. Brokers Kiran Pillai, Josh Rutman, Mark Wizel and Lewis Tong along with JACX Property’s Michael Jackson, who acted as transaction manager, closed an expressions of interest campaign for it in mid-August.
The agents touted that the location, in South Melbourne’s Emerald Hill precinct, contains world class retail amenity. The campaign didn’t promote the rent Dentsu was paying. However, based on market levels, the yield equates to 5.3 per cent.
It is selling to an as yet undisclosed local private investor at a building rate of more than $9600 per square metre – a record for the area.
“The property was well sought after by both privates and institutions and despite having a short WALE (weighted average lease expiry) and tightening funding conditions, it was aggressively pursued by buyers looking to capitalise on the strength of the fringe office markets,” Mr Pillai said.
Mr Wizel added that “there’s little doubt that some of Australia’s biggest businesspeople and property owners are considering their current positions and whether being nine years deep into a boom cycle is enough stimulus for them to offer their asset to a competitive marketplace of active buyers”.
Between the South Melbourne Market and Clarendon Street retail strip, parts of Emerald House have views to the Melbourne CBD, about a kilometre away.
Elsewhere in the suburb, developers recently lodged plans to replace a 4641 sqm site at 80-84 Cecil Street with an eight-level complex containing 14,845 sqm of lettable office area and 800 sqm of retail.
CBRE sold the land where this development is earmarked for $41 million last year against price expectations of $35 million.
“The South Melbourne market is a precinct that’s being tracked by a number of buyers and developers and is now being viewed as the next true standalone Melbourne office zone and set to follow a similar trajectory to established areas such as Richmond and Cremorne,” Mr Rutman said.