Some strong sales activity coming out of the Melbourne market is helping to paint a more positive picture of the commercial landscape in wake of COVID-19.

According to a CBRE investment sales report just over $200m of commercial property has been transacted by its Melbourne-based team over the past nine weeks, making up just over a third of all reported transactions since the COVID-19 pandemic was declared on March 11. 

The report confirms a range of different types of properties have changed hands including several significant assets.

Among them are a heritage style commercial office building at 355 Spencer Street that sold to Sydney based Avari Capital Partners for $38.5 million, a Woolworths anchored neighbourhood shopping centre located in Keysborough South ($33.13m), a significant infill development site of 1.6ha in Glen Waverley ($23m), and a commercial office building in Frankston which is understood to have sold for around $20m. 

At a glance: 

• CBRE Melbourne has put together a report based on its results in the wake of COVID-19.
• The firm has brokered a series of strong transactions throughout the past few weeks, including the sale of 355 Spencer Street to Sydney based Avari Capital Partners for $38.5 million.
• According to the report, there has also been increased interest in retail strip investments in the sub-$15 million market.

CBRE State Director Josh Rutman said the results were shedding a different perspective of where buyer sentiment currently sits.

“It is difficult to sugar coat it," he said.

"As each day in mid-March passed, we were growing ever more concerned with what the potential impacts of COVID-19 was going to mean for our clients and subsequently our sales team. 

“The period between March 11 and 22 was very quiet and it was difficult to get genuine buyer engagement for properties which we had listed and were instructed to sell on behalf of our clients."

454-472 Nepean Highway was sold for about $20 million through CBRE. Source: CBRE 

According to Mr Rutman, the report also points to the identity of several of the successful buyers being very well known players within the industry suggesting that not all buyers are in agreement as to what the near term future holds for the sector. 

“We have been really pleased to see some of our regular customers make strategic acquisitions over the past nine weeks and it certainly puts somewhat of a spring in our step to know that several of the deals we have concluded have been to well- known players in both the investment and development spheres," he said.

The report indicates commercial office buildings have made up just over a third of all transactions to date, with a mix of vacant and well-leased assets changing hands since March 11.

Mr Rutman said investors were actively seeking well-located buildings in anticipation of a new approach to decentralised working by office users, which could see several metropolitan assets come back into vogue. 

“There has been a good spread of these larger transactions, however, what has been more surprising is the positive sentiment in the sub $15 million market, with just over 75 per cent of all of sales being within this price bracket,” he said. 

336 Clarendon Street, South Melbourne was transacted recently through CBRE. Source: CBRE

CBRE also reports there has been a groundswell of buyer interest in strip retail investment properties across Melbourne in the sub-$15 million price range, including recent sales in South Melbourne, Glen Huntly Road, Elsternwick, and Victoria Avenue in Albert Park. 

Head of Strip Retail Investments for CBRE, Rorey James, said investor confidence in strip retail was "shining through" at present.

"In speaking with these buyers, they point to what they believe will be a renewed level of trade as people show a propensity to shop closer to where they live in open-air streets where they can more safely congregate," he said.

“They are also of the view that many locally based businesses within Melbourne’s strips could benefit from customers spending more of their discretionary income locally given many, for example, won’t be able to consider overseas holidays for some time.

According to the report, the third most traded asset class according to the report is development sites, which despite several headwinds for median house price growth, continue to trade at a steady rate. 

Mr Rutman said the predominant site sales have been those that accommodate townhouses in inner and middle-ring suburbs, as well as longer-term landbanks that will service a growing need for residential accommodation in the coming years. 

“Developers are taking a very strategic approach to acquiring the right landholdings to either deliver product that will still be in high demand now, or position themselves for the next cycle during which we expect to see a significant undersupply of quality dwellings for Victorians due to the huge fall in housing starts and approvals," he said.

Click here to view the full report.

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