Confidence swells in Melbourne’s office market as private family firm secures largely vacant St Kilda Road building with swift 5-day settlement

10 January 2025

A 69 per cent vacant building with a 0.3-year WALE has unconditionally sold to Marwood Property Group following hotly contested sale campaign

JLL Office Investments has successfully facilitated the sale of 432 St Kilda Road, Melbourne, to Marwood Property Group.

The private family firm will execute a staged refurbishment and leasing strategy with approval for the works already secured for early 2025.

The deal was brokered by JLL’s Josh Rutman, Tim Carr and Piper Dedrick. The transaction was free of conditions and was settled within five days of the exchange of unconditional contracts.

The 9,128sqm office building, positioned on St Kilda Road, which has one of the country’s highest vacancy rates, attracted significant interest from private investors, residential developers and partial owner-occupiers, including office and medical companies.

Despite the challenges with the asset, being a 69 per cent vacant building with a short remaining WALE of

0.3 years, the building presented several opportunities for multiple purchasing cohorts. This demonstrates a surge in optimism along St Kilda Road, largely driven by the forthcoming Anzac Train Station and several new infrastructure projects, which are expected to significantly enhance the precinct’s amenities.

“This landmark sale highlights the compelling opportunities within in the Melbourne office market for those willing to look beyond the current challenges facing the sector,” said Mr Rutman, Head of Capital Markets – Victoria.

“St Kilda Road’s challenges are well-documented; however, this precinct remains one of the most liquid markets in the country. In Q4 2024 alone, nearly $100 million worth of assets changed hands, contributing to approximately $730 million in completed sales since 2021.”

Mr Rutman said buyers continue to see value in securing holdings with quality fundamentals that are well positioned for future growth.

“The mixed-use precinct continues to evolve, attracting capital from interstate and offshore.

“We’ve seen average annual transaction volumes since 2020 hover in the $100 to 150 million range for St Kilda Rd, so it’s a clear sign of renewed appetite to see around $100 million of assets change hands in 2024.

“We expect this trend to continue into the early part of the new year with other assets in the precinct close to trading,” Mr Rutman said.

Tim Carr, Associate Director, Office Investments, highlighted that this transaction exemplifies the market’s growing trend toward countercyclical investments in Melbourne, driven by the compelling returns exceeding 15 per cent available from day one.

“In the final two months of the year, we saw three major transactions in the city fringe that accounted for close to $120 million in sales volume, with an additional $200 million approximately under exclusive negotiations.

“A major trend that we have seen is the rising engagement and bidding activity from interstate syndicators and private investors (predominantly NSW, QLD and SA based) who recognise the opportunity to purchase assets well below replacement value and capitalise on Melbourne’s strong growth prospects. This buyer profile accounted for 63 per cent of our bidding profile in Q4 for the JLL team.”