CostaFox Offloads Office in Red-Hot Cremorne to Bayley Stuart for $50m

Another commercial office in Melbourne’s super-charged Cremorne market has sold “off the plan” in a fund-through deal that will see the partnership of fruit and vegetable king Robert Costa and developer Michael Fox pocket $50 million.

The buyer, investment firm Bayley Stuart Capital, is so confident of the former working class suburb’s ability to attract high profile tenants that it is taking a second dive into the hip postcode, purchasing CostaFox’s vacant building without a lease being signed.

That confidence may not be misplaced. Low vacancy rates and rising demand from a surge of tech-focused tenants has proved a potent mix for Cremorne’s landlords.

Bayley Stuart, run by Alasdair and Andrew MacGillivray, made a similar play a year ago when it moved on developer Icon’s $50 million tower at 600 Church Street, a purchase it successfully bedded down when it signed up online property portal Domain as anchor tenant 10 months later.

As if to demonstrate the depth of demand, blue-chip corporate BHP was reported this week to be considering a move to the now-thoroughly gentrified suburb.

The mining giant is toying with leaving its current headquarters at 171 Collins Street when its lease expires in 2023 and moving to Alfasi Property’s under-construction tower at 510 Church Street, a shift that would upend traditional corporate expectations of Melbourne’s fringe office sector.

Mr Fox said construction on Bayley Stuart’s new seven-level, glass-curtain-wall building, just off Church Street at 1-11 Gordon Street, was slated to start next month under builder Hacer’s direction.

The deal was stuck at a rate of $10,000 per square metre, which Mr Fox believes is a new benchmark for a vacant office building in the inner-east.

“The buyer will fund the construction and take on all the leasing risk,” he said.

CostaFox originally intended to subdivide the 5000 sq m office into 26 strata suites before Bayley Stuart showed up as a potential buyer through Dawkins Occhiuto agent Andrew Dawkins.

The existing brick warehouse’s listed heritage facade will be retained, with the curtain glass rising up behind to a rooftop garden with barbecue facilities, eating area and meeting rooms embedded in the greenery for tenants.

The 700 sq m floor plates will sit above a ground floor cafe run by Julien Mousse, fresh from opening the Bentwood eatery in Fitzroy.

“It’s a level up from what is currently in the market in Cremorne,” Mr Fox said.

The suburb’s popularity with creatives and corporates is spreading to surrounding Richmond.

Charter Hall is mooted to have its eye on a site belonging to the Agosta family at 480 Swan Street as a new headquarters for hardware giant Bunnings, joining the growing list of market players offering large new buildings in the area.

The Agosta family’s corner block is occupied by the Mitchell Building Supplies depot and backs on to Burnley Station, a major stop on the city’s busy eastern train network.

Charter Hall has close connections with the hardware retailer.

Its Charter Hall Direct Consumer Staples Fund is buying up a portfolio of Bunnings assets. Earlier this week it purchased another Bunnings-anchored retail complex on Perth’s Stirling Highway for $35 million.

Wesfarmers-owned Bunnings’ current head office is in Hawthorn East at 16-18 Cato Street, where its lease is due to expire in 2022.

Charter Hall would not comment on the proposal. The Agostas, known for developing Nino Early Learning Centres, were approached for comment.
The Mitchell site, owned by Frank and Beverly Agosta, is next door to another development block where Clement Lee’s Riverlee has teamed up with Bamfa Properties, run by the couple’s son Adam Agosta, to speculatively build a $190 million, 13-level commercial tower with 17,000 sq m of lettable space.

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