The former headquarters of Fratelli Fresh and Danks Street Produce Merchants in Sydney’s Waterloo has been sold for more than $25 million.
The vendor, Sydney-based property developer Addenbrooke, offloaded the 2125-square-metre site at 3-7 Danks Street to a local investor and developer, who wants to convert the warehouse space into boutique office space.
The buyer, who owns multiple properties in the area, had to fend off 14 other bidders in the race for the former food markets. The other contenders were a mix of owner-occupiers, investors and both residential and commercial developers.
The property was sold by CBRE’s Harry George and Scott Gray-Spencer, in conjunction with Gunning Real Estate’s Tom Speakman.
“(After the conversion), the buyers will lease it and take advantage of the office market now: the low vacancy, high demand and increasing office rents,” Mr George said.
While the new owners knew about the property’s history, it was the property’s underdeveloped nature and size that drew them to the investment.
“They loved that it had a large vacancy which they could use as a blank canvas and target the next generation of tenants,” Mr Gray-Spencer said.
The south Sydney location also played a role in the buyer’s purchasing decision.
“They saw it, they liked it, they just wanted to have something in that area. There’s a lot of tenants that like it down there because of the amenity and retail elements,” he said.
The conversion will be completed in two stages, with the second phase on the eastern side to begin after the existing tenant vacates at the end of June 2019.
Mr George added that while the new owners have no redevelopment plans, this could change depending on the next property cycle.
Any potential redevelopment faces a height limit of 15 metres and an allowable gross floor area of 4250 square metres.
The Danks Street Produce Merchants was operated by the Quattroville family, led by Peter and Annette Quattroville, in the Waterloo warehouse since October 2016. They closed the European-style markets at the end of 2017, citing changes in the industry caused by food delivery services such as Uber Eats and Deliveroo, Good Food reported.
The Danks Street building was also home to the first Fratelli Fresh outlet, operating as a restaurant as well as a food hall selling groceries and produce for 10 years, before hospitality giant Urban Purveyor Group acquired the brand in 2016.
More changes for south Sydney
While a bulk of industrial property in the inner-city fringe had been converted to apartments in the past few years, the dip in the residential property market has led to other reuses.
“Offices yield a lot higher than warehouses, however a lot of supply has come offline from an industrial point of view; industrial property for last-mile delivery is making a comeback as well,” Mr George said.
Last-mile delivery refers to the final leg of the logistics process where goods are shipped from a warehouse, closer to airports and ports while still located in the metropolitan area, directly to the destination.
Waterloo in particular is set to see more residential development, with the City of Sydney proposing new planning controls for the Danks Street South precinct. The proposal would allow for about 1275 new homes, including affordable housing.
“There’s a huge increase in density in that area and they’re all going to need somewhere to work,” Mr George said.