425-427 Riversdale Road, Hawthorn East sold at auction earlier this month. The marketing generated a very strong response and a large crowd at auction despite the weather.
The mid 70’s constructed 2 level office building had a net lettable area of 1056m2 and 30 outdoor carspaces.
The property was sold at auction on a vacant possession basis for $4,650,000 reflecting $4,400psm of building area and a market yield in the order of 7%. The marketing was targeted to investors, owner occupiers and developers with interest principally from owner occupiers who were factoring in capital expenditure allowances for various upgrades of the property.
Once factoring in capital expenditure for air-conditioning, facade and internal upgrades, the rate per square metre achieved would be circa $5,000.
An interesting comparison is the Abi Group building at 41 Burwood Road, Hawthorn - a circa 1995 3 level extensively fitted out office with basement carparking. Opposite Hawthorn station and with trams at the front door, the building was superior by way of location and condition requiring no capital expenditure. 41 Burwood Road sold in December 2010 for $6,850,000 representing $4,900/psm.
This comparison demonstrates that the market is holding firm and has marginally improved for certain locations. Despite global economic circumstances, there are still a number of firms wishing to owner occupy in preference to leasing. The current tight supply of office space should keep this trend continuing into the foreseeable future.