South Melbourne office asking $6.8 million two months ago sells at auction for $8.6 million

The South Melbourne site was offered permit-ready for this 10-storey residential building with 29 dwellings. Instead, the purchaser will occupy an existing office and propose a new development.

A South Melbourne office for sale two months ago asking $6.8 million traded on Thursday for $8.55 million after newly appointed agents instructed an auction campaign.

Seven bidders – a mix of international, interstate and local developers, contested for 67-69 Palmerston Crescent before a crowd of more than a hundred.

Currently configured as a double storey commercial building with 750 square metres of vacant area and eight car parks, the site came permit-ready for a residential redevelopment with 29 dwellings (artist’s impression, right). 

It is understood to have been knocked down to Fortis Development Group which intends to occupy and rebuild (Fortis is headquartered in Wooloomooloo, Sydney. Its local office at nearby 49-51 Stead Street, South Melbourne, sold for $10.2 million in September after 20 days on the market).

The sale price of 67-69 Palmerston Crescent was about $2 million over reserve. The result followed a (short) three week marketing campaign.

Melbourne Acquisitions’ Dominic Gibson and James Latos with Savills’ Clinton Baxter, Jesse Radisich and Benson Zhou represented the vendor, Manda Capital.

Mr Gibson said he now has the under bidders and several other investors with capital to deploy facing a stock-starved and competitive market.

“This result is a clear sign of buyer demand and good barometer for vendors as we enter 2020,” the agent said. “Owner occupiers have been competing a lot more with developers for stock than they were at the start of the year.”

The office at 67-69 Palmerston Crescent, South Melbourne, sold at auction for $8.55 million after former agents unsuccessfully marketed it via an expressions of interest campaign asking $6.8 million.

“It was clearly the right strategy to auction 67-69 Palmerston Crescent.

“It brought together investors and owner occupiers who were considering retaining the property as an office and developers looking to use the existing approved permit”.

The agent estimated development site transactions in South Melbourne and Southbank more than halved this year.

“The city fringe market has always been very popular and it’s an opportune time for those looking to divest and capitalise on strong buyer activity”.

The site

The 592 square metre Commercial 1 zoned South Melbourne site, at the corner of a laneway, was permitted to make way for a 10-storey residential building.

Any incoming purchaser could have considered offices or a hotel as an alternative development outcome.

The $8.55 million sale price values every approved dwelling at $294,827.

It also prices each sqm of land at $14,422.

The property was the subject of an unsuccessful expressions of interest campaign only two months ago.

The surrounds

West of Eastern Road, Palmerston Crescent becomes Raglan Street.

Last year, a four storey 1696 sqm office on an 835 sqm plot with 35 car parks at 9-17 Raglan Street sold for $14 million – a 53 per cent rise on the ($9.1 million) price the vendor paid for the then-vacant property in 2016.

In 2016, Michael Buxton bought the neighbouring four-level office, 19-25 Raglan Street, as a passive investment.

This 1689 sqm building on a 712 sqm holding also cost $9.1 million.

Palmerston Crescent is walking distance to the Anzac train station, under construction as part of the $11 billion Metro Tunnel project, which will connect South Yarra to North Melbourne. 

Directly behind the new Fortis office Australian Unity is about to start construction of a vertical aged care building and retirement village. 

Branded The Grace Park Albert Park, given the area’s proximity to the top of Albert Park Lake, the project will replace AU’s long-time headquarters (the insurer and fund manager relocated to an ISPT owned office in Spring Street, in the city, earlier this year).

The 67-69 Palmerston Crescent property includes eight car parks.
The South Melbourne site (marked) relative to the Melbourne CBD about four kilometres away.

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Marc Pallisco

A former property analyst and journalist, Marc is the publisher of realestatesource.com.au.

Marc Pallisco