First Major Office Transaction of 2023 Signals Investor Confidence in Medium-Term Outlook for Melbourne CBD Market

12 April 2023

The demand from investors for secondary office assets within the Melbourne CBD is intensifying, as a central Melbourne CBD office building has sold for around $30 million following a public sale campaign which attracted a mix of local, interstate, and international investor interest.

The sale represented the first major freehold property transaction in the Melbourne CBD for 2023.

JLL’s Melbourne CBD Sales agents Josh Rutman, Nick Peden and Mingxuan Li exclusively handled the International Expressions of Interest campaign for 99 Queen Street on behalf of a private family after 17 years of ownership. Thomson Geer’s Eu Ming Lim was the acting solicitor on the transaction.

With over 200 buyer enquiries received by the agents, the campaign generated competitive bidding from China, Singapore, Hong Kong and Australia. The successful purchaser was a Mainland Chinese investor sourced via JLL’s Asia Markets division – a first-time entrant into the Melbourne CBD market.

JLL research shows that 46% of tenant briefs were looking for nothing less than an A grade building, and this is expected to increase throughout 2023. Investors are therefore actively looking to secure secondary or B-Grade office buildings – as opposed to development sites – to conduct a refurbishment program in order to capture future tenant demand.

“The prospect of finding an appropriately sized parcel of land has diminished as the CBD has been largely built out. If you couple this with the increasing cost of construction, the alternative of refurbishing older buildings has become the preferred avenue for investors.

“We are in discussions with a number of long-term holders of office assets who are assessing the best avenue for maintaining the value of their properties given the mounting challenges with higher vacancy and increasing holding costs such as Land Tax.

“Some have looked to partner with groups that have expertise in the repositioning of office buildings to ensure tenant retention and drive better returns. Others have simply elected to offload as demand for these buildings remains robust,” Mr Rutman and Mr Peden added.