NINE major sales worth $567 million have taken place in Melbourne’s CBD so far this year, according to Colliers International, and another three big assets are in due diligence and tipped to fetch another $460 million.

This would push sales above the $1 billion mark. The three buildings are believed to include 717 Bourke Street and 737 Bourke Street.

The largest sale was 485 La Trobe Street, which was sold by Investa Property Group to CLSA Capital Partners for $140.1 million, on a yield of 7.8 per cent.

Next cabs off the rank were three half-building sales: 800 Collins Street ($76.87 million, yield 7.6 per cent), sold by Australian Prime Property Fund to SEB Asset Management; 570 Bourke Street ($76.5 million, yield 8.86 per cent), sold by Charter Hall to Perron Group; and 1 Spring Street ($67 million, yield 7.51 per cent), which was acquired by Daniel Besen from Record Realty.

Colliers’ Melbourne CBD office report for the third quarter concluded that these sales reflected strong tenant demand, limited supply leading to a decline in the Melbourne CBD office vacancy rate, and strong rental growth.

National research director Nerida Conisbee said Melbourne CBD’s vacancy rate of 6.5 per cent was the lowest of any Australian capital city. ”It is not surprising that there has been increased interest from investors,” she said.

Nick Rathgeber, Colliers investment services director, institutional, said the Melbourne CBD primary market had been very strong. ”Renewed demand has also surfaced in the secondary market,” he said.

Ms Conisbee said overall yields in Melbourne CBD’s A and B-grade sectors had compressed in the range of 25 basis points since the first quarter, while premium yields had remained stable.

”While there have been no premium sales in the Melbourne CBD recently, the overwhelming demand from offshore pension funds and institutions, together with other national sales, suggest a market yield range of 6.5 to 7 per cent,” she said.

”Current A-grade sales evidence suggests a market yield range from 7.5 to 8 per cent. However, these assets have been at the lower end of the A-grade market, so properties in superior locations with stronger income will easily attract a significant premium to these levels.”

Colliers’ research found the firming of yields contributed to an increase in capital values by about 5 to 7 per cent on average.

Mr Rathgeber said investors were hungry for high-quality stock in Melbourne CBD priced between $50 million and $150 million. Demand came from offshore groups, superannuation funds, unlisted funds, wholesale funds and private investors, and would be further boosted next year as wholesale funds and real estate investment trusts re-entered the market.

Story by Philip Hopkins www.smh.com.au