A Parramatta retail property owned by the same family for nearly 40 years could be transformed into much-needed office space after being listed on the market with a price tag of $12 million or more.
The site at 302 Church Street – in the heart of Parramatta’s famous “eat street” precinct – is currently fully leased to eight food and beverage and retail operators including Coco Cubano, Pho Mai and Rio Brazilian Restaurant.
But agent Peter Vines, managing director of Ray White Commercial NSW-Western Sydney, said there was potential to convert the upper floor (leased to Rio Brazilian) into separate office space, either as traditional office leases or a coworking operation.
“There are massive windows which run the whole way along the outside of the property, so it would be very easy to convert into offices,” Mr Vines said.
The property, which has three street frontages including the Church Street/Phillip Street intersection, is currently returning a net annual rent of $754,390 plus GST, which Mr Vines says could be increased.
“The [upstairs] space is currently returning about $270 a square metre [gross per annum], which is nothing, so there’s upside in the rent to begin with,” he said.
By comparison, the average monthly cost of renting a coworking desk is $500 in Parramatta, according to figures compiled by flexible workspace broker The Instant Group, based on an analysis of completed transactions in the 12 months to June 2019.
A 2017 report from Knight Frank Australia, Flexible Workspace, Coworking, & The Future, stated that coworking operators typically aim to install one “work point” or desk for every five to six square metres leased.
Replicating this ratio on the upper floor of 320 Church Street would equate to about 85 desks, or an overall return of $1000 a square metre (3.7 times the current rate of return).
Mr Vines said Parramatta’s tight office market – the vacancy rate is currently 2.7 per cent, according to the Property Council of Australia’s latest Office Market Report – meant conditions were ripe for a partial office conversion.
“There’s a shortage in particular of small offices in Parramatta,” said Mr Vines, adding that within Parramatta “there’s space being built for larger corporates but there’s not a lot of smaller spaces for start-ups or small business”.
“I would see local solicitors, architects or real estate agents being attracted to the building, particularly as it has its own identity as a building. A lot of coworking companies are also geared up for these smaller opportunities or these smaller offices as well.”
Alan James, director of office leasing at Colliers International, said in May that demand for office space in Parramatta, which is currently outstripping that of the Sydney CBD and fringe markets such as St Leonards and North Sydney, was particular strong in the sub-300-square-metre category.
“[Those currently leasing smaller offices] are choosing to either renew in their current accommodation or move into C or D-grade buildings,” Mr James said.
The Church Street building is being advertised as having “underlying development potential” under a proposed increase to the floor-space ratio (FSR) limits in the Parramatta CBD, but Mr Vines said the property’s narrow 774.3-square-metre site might limit the extent of any additions.The two-storey property is not heritage-listed.
Mr Vines said the property would be particularly popular with investors attracted to the diversified income stream and the stability of having eight tenants.
The broader economic fundamentals underpinning the Parramatta market would also be a drawcard.
“There’s a lot of people from around Sydney and even interstate who are looking for a return on their money at the moment and Parramatta as an area is so sought after. It really is a second CBD [in Sydney]. The projected growth in the Parramatta CBD is immense and you’ve got tens of thousands of new apartments in the works as well,” he said.
302 Church Street is being offered for sale by expressions of interest closing Wednesday, October 9.
Keep up with Commercial Real Estate news.