Record price paid for development site in bohemian Balaclava

The property at 23 William Street, Balaclava, is next door to the Red Scooter event and wedding reception.

A commercial investment with enormous development upside in the bohemian St Kilda East pocket of Balaclava has sold for $9.05 million – a price which sets a record value for land in the area.

The 1011 square metre holding at 23 William Street is selling to a local buyer following a campaign which yielded strong interest from local and offshore investors and land bankers.

Developers – some who would replace the site immediately – were also in the mix of prospective buyers, according to Knight Frank’s Stephen Kelly and James Thorpe, who brokered the deal.

The transaction values the land at nearly $9000 per sqm, believed to be a watermark for Balaclava.

It was also struck on a very low passing yield – 1.27 per cent – based on the current annual net rental return ($114,960). The property, which is next door to the Red Scooter event and wedding reception, is leased until 2020 with no renewal options.

The agents are responsible for two other recent development site sales in the area: Nelson’s Quarter at 285-187 Inkerman Street and 3-7A Nelson Street sold for $9.5 million while 99 Hotham Street, an old hall offered permit-ready for a townhouse project, traded for $9.34 million.

Knight Frank also sold 99 Hotham Street, Balaclava, in March.

Mr Kelly and Mr Thorpe said Balaclava, about 7.5 kilometres south-east of the Melbourne CBD, is a very small area where site turnover is low and tenancy demand is strong.

The Carlisle Street retail strip and Balaclava train station are both walking distance from 23 William Street. The St Kilda Botanic Gardens and beach and Acland Street shopping strip are also in the vicinity.

“There is a clear shortage of commercial development site opportunities within the Balaclava precinct and this drove demand for the site,” the brokers said.

“Office rental rates have grown significantly in recent times and we have consequently seen a move from developers looking to engage in commercial office developments above residential opportunities”.

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Marc Pallisco

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