A surge in interest from government and community sectors who are seeking upgrades to better quality buildings with modern features within Melbourne’s office leasing market has opened up a prime opportunity for investors.
The demand to move to buildings with higher grade amenities in desirable locations is largely influenced by the competition between government and private sectors wanting to attract the best young talent as well as businesses who are looking to increase staff retention.
Stronghold Investment Management has recently created a property trust to purchase two buildings located in the Monash Employment Precinct, in anticipation of the potential growth in commercial real estate.
“We have secured two modern, freestanding, fully leased office buildings each on its own title with a total property value of $21.5million,” Steve de Nys of Stronghold said.
“We anticipate the Mulgrave Property Trust #11 established to purchase these buildings will have an average cash return on funds invested over the first three years of 8.3% from settlement, payable every 2 months and exclusive of depreciation benefits.
“We have also recently agreed terms with building tenants PZ Cussons to take up a 5-year lease option, improving the Weighted Average Lease Expiry for this investment from 3.1 to 4.5 years1.” The agreement is subject to execution of formal documentation.
Mr de Nys said the agreement was a symptom of rental demand for quality commercial buildings in Melbourne.
In a recent news report, Savills associate Monica Mondkar, stated that “last year’s net absorption for (commercial property in Melbourne) was 117,000sqm, which smashed the 10 year, 86,000sqm average and all indications are that we are in for another 12 months like that” 2.
Based on the increase in demand from tenants seeking upgrades and the estimated increase in population to grow from 4.5 million to 7.9 million by 2050, it is no surprise that developers and investors alike are looking to invest in the Melbourne market.
Matthew Knight, vice-president and head of Australia for Pembroke Real Estate said the demand was being driven by businesses looking to attract young workers.
“With the war for talent, to get good people it’s more and more important for tenants to have a good building to keep good staff” * – Matthew Knight.
Stronghold Mulgrave Property Trust #11 is currently open for subscription until June 2.
Mr de Nys said this was a unique opportunity for wholesale investors to diversify their portfolio and take advantage of the Melbourne market conditions.
He said Stronghold had an established track record of creating property investment opportunities that provide superior returns but a lower risk profile than traditional opportunistic or enhanced return funds, therefore offering a clear advantage to their investors.
Register for more information about Stronghold’s Melbourne property trust here http://www.strongholdpropertytrusts.com.au/
1 Subject to formal documentation
2 Reported in www.realcommercial.com.au