GARDA's Strategic Move: Navigating the Melbourne Office Market Amidst Challenges
- Saturday, 25 November 2023 05:56
"GARDA Property Group, a listed Queensland property fund and developer, has made a strategic exit from the challenging Melbourne office market. The recent sale of 8-10 Cato Street in East Hawthorn marked a significant milestone in GARDA's Melbourne venture. The property, featuring an office-warehouse and partially leased to solar panel manufacturer RayGen Resources, was sold for $24.1 million, slightly below its $25 million book value but notably higher than the $20.1 million purchase price in 2020.
Negotiated off-market by JLL agents Tim Carr and Josh Rutman, the deal is set to be finalized before Christmas, with a potential 5.75 per cent yield if fully occupied. The buyer, Minsmere (trading as agribusiness Chartwell Farms), plans to occupy part of the 3654 square meter building, situated on a 3371 sq m land parcel with ample space for 105 car parks—an attractive feature for GARDA.
Notably, GARDA's shift away from Melbourne's office market follows previous transactions, including the sale of a health services building in Box Hill for $40 million in April, reflecting a 14 per cent discount to its book value. The company conveyed its future focus on the industrial portfolio in a recent announcement to the Australian Securities Exchange.
In the broader context of the Melbourne office market, CBD tower values have experienced a 15 per cent reduction this year, according to CBRE research. With only 56 per cent of CBD workers returning to the office, smaller suburban offices with vacancies are gaining attention from a distinct buyer group. Cashed-up owner-occupiers seeking to exit the rental market and make strategic property acquisitions are becoming a noteworthy trend in this evolving real estate landscape."
"In conclusion, GARDA Property Group's withdrawal from the Melbourne office market, exemplified by the successful sale of 8-10 Cato Street, marks a pivotal strategic move in response to the challenges facing the sector. The transaction, characterized by a positive sale price relative to its book value, underlines GARDA's adept navigation of the complex real estate landscape.
With a focus shifting towards its industrial portfolio, GARDA's decision aligns with broader market dynamics, where Melbourne CBD office tower values have seen a notable decline. The evolving preferences of buyers, particularly cashed-up owner-occupiers seeking alternatives in suburban spaces, signal a transformation in the traditional investor profile.
As the company finalizes its exit from certain office assets, the emphasis on industrial holdings suggests GARDA's commitment to adapting its portfolio to align with evolving market trends. The sale of Cato Street and previous transactions reflect a strategic repositioning, highlighting GARDA's resilience and strategic foresight in the dynamic Australian real estate market."