Small business owners and investors have snapped up all 47 strata offices in a new suburban development 20 kilometres west from the Melbourne city centre.
The development known as 111 Overton Road forms part of the $2.5 billion master planned Williams Landing estate, being developed by listed player Cedar Woods, and is its first foray into the booming Melbourne strata office market.
Cedar Woods chief operating officer Patrick Archer told The Australian Financial Review the sell-out had been quicker than expected (seven months) and plans were already under way for a second strata office development known as 101 Overton Road to be developed as part of the 50 hectare Williams Landing town centre.
The sell-out follows retailer Target committing to a new office building under construction at Williams Landing (and acquired by Centuria for $58m) as its national headquarters and due for completion next year. Mr Archer said the Target commitment had boosted confidence and interest in Williams Landing.
“Most of the strata office buyers are owner occupiers from the local Wyndham area, people with their own IT and professional services businesses, or they have been bought them as investments, given yields on strata offices are higher than they are for residential,” Mr Archer said.
Strong demand among small businesses for strata offices is a common trend in Melbourne, with many taking advantage of low interest rates to buy their own premises, which are often held in self-managed super funds. Rising office rents are also encouraging more SMEs to buy their own premises.
“For small business owner, it makes a lot of sense to have your office suite in an SMSF, and have the business pay it off,” Mr Archer said.
Prices averaged around $5000 a square metre for the strata offices, with some as small as 53 square metres. Some buyers combined offices to make large commercial spaces as big as 383 sq m, Mr Archer said.
Knight Frank’s Matthew Romanin, a selling agent at 111 Overton Road, said Williams Landing was far more affordable than the Melbourne CBD whilst offering amenities such as a shopping centre, connectivity to Williams Landing train station and other public transport options.
Recent sales of strata offices at UEM Sunrise’s Aurora Melbourne Central high rise have been struck at rates above $10,000 a square metre, more than double the prices paid at Williams Landing.
Cedar Woods has commenced the planning and design of its next strata office building , which is due to launch by the middle of the year. Construction of the first strata office building will commence soon with completion anticipated March 2019.
Rising strata office values have encouraged more developers to consider doing a strata office project rather than apartments, or including strata office as part of the development mix.
Recently, the Pask Group snapped up an old medical centre in East Melbourne on the city fringe with plans to turn it into a strata office building rather than develop apartments or a hotel on it.