Investors put off by the tightening yields on strata shops in Melbourne's CBD are looking upwards to strata offices.
The individual offices sometimes covering whole floors of a city building have become highly sought after, especially among owner occupiers taking advantage of low interest rates to buy a piece of the city.
Colliers International research shows sales of strata offices totalled $35 million in 2015 with an average 367-square-metre office fetching an average price of $1.95 million.
A Chinese investor has paid $2.65 million for 3/306 Little Collins Street, a 370-square-metre office at the historic Causeway House in the heart of the city.
The price equates to a strong $7162 a square metre. It is leased for another three years to New Zealand PR company SenateSHJ which pays $146,00 a year in rent, giving the deal a 5.5 per cent yield.
CBRE agents Nick Lower, Tim Last and Tom Tuxworth negotiated the sale on behalf of vendor Rohan White, who was formerly the team doctor for St Kilda Football Club.
And on the edge of the CBD, Colliers agents Chris Ling and David Sia sold level 8 at 21 Victoria Street before the office's expressions of interest campaign closed.
An investor paid $1.75 million for the 320-square-metre whole floor on a tight yield of 5.62 per 4 cent. The 10-storey building is on the corner of Exhibition and Victoria streets opposite the Carlton Gardens.
The price equates to $6093 a square metre. A similar-sized floor on level 3 sold for just $865,000 in 2010.
Mr Ling said investors are increasingly looking at office because strata retail yields are so tight.
The 95-square-metre shops 1 and 2 at 1 Little Collins Street sold at the end of last year for $2.64 million on a 3.6 per cent yield and 306 Flinders Lane, a 129-square-metre space, sold off-market of $2.95 million on a 3.81 per cent yield.
"Because strata retail is compressing so hard investors are now looking at other assets that get a higher return. This office was a whole floor and had a long lease to a stable tenant," Mr Ling said.
"It's more attractive than the retail market and because it's on Victoria Street and it's got big windows on three sides it has residential upside," he said
The top two floors of the building have already been converted to residential. The vendor of the office is the tenant, Johnstaff Projects, a property consultancy business working on projects including MIT's $100 million Sheraton hotel in Kathmandu, Sydney's $5 billion WestConnex 2 road and a number of health facilities.
The sale follows the recent strata sale and leaseback deal for Crockett Chambers in Lonsdale Street. The chambers belonging to Robert Richter QC and other investors fetched more than $8 million or more than $6000 a square metre.
The 1300-square-metre office covered two floors at 530 Lonsdale Street. Another legal precinct office at 12/271 William Street posted a record 5 per cent deal when it sold to an investor for $1.45 million.
But higher prices are commanded close to the centre of the city. An owner-occupier paid $10,000 a square metre for a 48-square-metre office at 102/20-22 McKillop Street. The trend towards strata office emerged in May last year when the price of a 300-square-metre whole floor office at 140 Bourke Street doubled in value in 12 months to $8700 a square metre.
