A private Melbourne family has paid around $55 million for a landmark Hawthorn office building fully leased to Swinburne University.

The 2 Luton Lane building comprises 5,660 square metres of office space and occupies a strategic site near the corner of Burwood and Glenferrie Roads.

The price translates to a yield of approximately 5.3 per cent and a building rate of almost $10,000 per square metre - the highest achieved for a metropolitan Melbourne office asset in 2019. 

The four-level, 1980’s property features larger campus-style floor plates and was offered subject to a new five-year lease to Swinburne University. It serves as the university’s head administration office and includes a striking atrium entrance and basement car park.

At a glance:

• $55 million paid for Hawthorn office building translates to highest result per square metre achieved for Melbourne office asset this year
• The result translates to a building rate of almost $10,000 per square metre 
• Sale price represents a 46 per cent rise in capital value in just four years

CBRE Melbourne Middle Markets agents Scott Orchard, Josh Rutman, Mark Wizel and Lewis Tong together with Gorman Commercial’s Stephen Gorman and Jonathan McCormack negotiated the unconditional sale on behalf of Sydney based investors and property syndicators Trumen Corp and Bricktop Group.

The sale was negotiated on a short settlement immediately after the close of an international Expressions of Interest campaign.

Mr Orchard said the sale highlighted the confidence investors currently have in commercial investment opportunities in the metropolitan Melbourne office market.

He said the building last changed hands in 2015 for $37 million – representing a 46 per cent capital value uplift in just four years.

“As we see a tempering of activity from the mainland Chinese buyer market, Melbourne and Sydney private family investors are now seizing their opportunity to secure quality assets, particularly as the cost of debt is at all-time lows which makes a circa 5% yield very attractive,” Orchard said.

“Large, well-proportioned holdings such as 2 Luton Lane rarely come to the market in Hawthorn, as owners have reaped the benefits of a very tight tenant vacancy environment.

“The opportunity to benefit from the strong existing income stream and explore other options for value-add opportunities and development in the future proved to be highly attractive to a range of domestic and international purchasers.”

The Luton Lane property is directly accessible from both Glenferrie Road and Burwood Road and offers a desirable cul-de-sac location, which has underpinned its appeal to both the university and former occupiers Skilled Engineering and Telstra.

Gorman Commercial’s Mr Gorman said that Swinburne had become one of the central drivers of commerce and activity in Hawthorn’s office market, where the vacancy rate had been maintained at a record low for several years given the shortage of quality sites available for commercial development.

“As a result, office yields of circa 5 per cent are now the rule rather than the exception,” he said.

“This precinct in and around Luton Lane has grown in stature as the preferred home for many corporate tenants, which has attracted larger investment groups seeking assets offering strong leases and suitable yields.

“The demand for this property, particularly from multiple private investors, shows how important yield and strength of lease covenant have become.

“With suburban office sales now consistently achieving yields of circa 5 per cent in this low interest rate environment, office owners have good reason to be positive moving forward."

Similar to this:

South Melbourne office investment sold for $10.2 million

Popular South Yarra nightspot sold to local investor amid strong buyer interest

Australia’s largest educational investment portfolio marketed for sale at more than $150 million