Mid-tier property developer Cedar Woods is soaking up strong demand for suburban offices in Melbourne, a real estate sector traditionally poorly-serviced in the western suburbs, as it plans multiple new buildings.
The developer has already pre-leased and sold three stand-alone office buildings and is midway through selling another strata office at its signature Williams Landing project in Point Cook.
On the back of that demand, it is planning several new buildings, including another strata offering and two corporate-focused offices.
The success of Cedar Woods’ first strata office building in Melbourne’s west is being reflected in a second, larger, structure in which half the units have sold within six months of launch.
Last month, it began construction on its first strata office, a five-level building at 111 Overton Road which it has fully pre-sold to 47 strata owners.
That building includes three upper levels of strata office, two lower car parking floors and 1500 square metres of ground floor space leased to Henry Bateman’s – the son of Primary Health Care founder Ed Bateman – burgeoning medical centres business, Our Medical Home.
State manager Lloyd Collins said selling out the project before construction started was “highly unusual” and had prompted Cedar Woods to fast-track another similarly sized strata office building.
That property, 101 Overton Road, was also performing well, he said.
More than half of the 71 available units have sold at an average per sq m rate of $5300. Strata offices in the previous building were around $4700 per sqm.
The majority of buyers, around 60 per cent, were investors, many of whom are locals parking the units in their self managed super funds or buying them to use for their own businesses, he said.
The offices were typically being occupied by financial, property and other services or small businesses. “There are multiple small- to medium-sized businesses in the area. It’s very entrepreneurial,” he said.
Mr Collins said Cedar Woods was in planning stages for a third strata building to “make sure we have the supply ready to respond to demand.”
The developer was also on the hunt for pre-lease tenants for two other office projects, a 20,000sqm structure at 1 Kendall Street and another 9000 sq m building at 95 Overton Road.
Williams Landing is in one of Australia’s fastest growing localities where the number of jobs increased almost threefold over the decade to 2016.
“By the end of the year we will have 29,000sqm of office either completed or under construction at Williams Landing,” he said.
As well as one strata building, Cedar Woods has finished development of two other stand-alone, fully-leased offices in the project.
Last year in July, it sold one, a 3100sqm office pre-leased to the Victorian government, for $25.93 million to Hellenic Property Investments, a subsidiary of the Hellenic Club of Canberra, on a yield of 5.4 per cent.
That followed the sale of another building, the new Target headquarters, to ASX-listed property fund manager Centuria for $58.2 million in June.
Cedar Woods has a practical monopoly on strata offerings in the west with no similar new projects nearby. Other strata units are only available near the city in Docklands or inner suburbs.
Private property powerhouse MAB Corporation has had similar localised success with strata sales at its University Hill development in Bundoora, in Melbourne’s mid-north, on the back of population and business growth in the area.
The CBD’s strata market has seen stellar capital growth from a flood of small to medium business owners seeking to control their leasing expenses and build ownership wealth.
Strata office prices in the city were now averaging $10,000 per sqm.
Published: The Sydney Morning Herald — Simon Johanson (March 23, 2019)