Cashed up Asian investors looking to develop a boutique hotel have set a new benchmark for land prices in West Melbourne.
The influx of offshore capital into Australia's commercial property sector shows little sign of slowing, with a non-descript two-storey office on Melbourne's busy King Street selling for $14.6 million to a Chinese investor.
The deal was finalised at a land rate of $15,135 per square metre, said Colliers International's Daniel Wolman, who negotiated the sale with colleagues Oliver Hay, Matthew Stagg and David Sia.
Mr Wolman said three different Chinese groups had placed offers for the property that were 50 per cent above bids submitted by local investors.
"There are quite a few Chinese groups in town looking at city and fringe sites where they can place a hotel. That north-west end of the CBD is growing quickly," he said.
The office at 407 King Street demonstrates the heat in the city's development sector.
The site, which has no development permit, was last purchased by a consortium of Hong Kong-based investors for $7.05 million in 2013. Just three years later, they have flipped it as a development opportunity for nearly double the original purchase price.
Offshore investors are not only looking to gain a foothold in Melbourne's hospitality sector.
An estimated US$1 trillion of capital is looking for a home in global real estate markets this year, according to CBRE's latest investor intentions survey.
The beefed-up property investment activity comes as negative sentiments in volatile global stock markets prompt caution from investors.
"The survey asked investors how much capital (gross acquisitions) they would deploy in real estate purchases this year. The results reveal there is approximately US$1.16 trillion of capital," CBRE said.
Another site in King Street next door to No. 407 was snapped up last year by private school Haileybury College.
The upmarket school paid a speculated $50 million for a substantial 10-level office at 383 King Street, which it intends to turn into the city's first privately-run secondary college.
Mr Wolman said development uncertainty in the central city was driving interest in fringe sites.
Debate over the city's high-rise development has intensified after Labor's Planning Minister Richard Wynne imposed strict new interim controls on the height and scale of new city towers.
The new rules are yet to be finalised, with Mr Wynne likely to set out guidelines on apartment sizes and designs later this year.
Address Sale Date Sale Price Site Area Land $/m2
407 King St, West Melbourne Mar-16 $14.6m 925 $15,135
113 Batman St, West Melbourne Dec-15 $35m 3,800 $9,210
409 Spencer St, West Melbourne Oct-15 $12.75m 1,200 $7,968
484 William St, West Melbourne Sep-15 $2.65m 345 $7,681
50 Batman St, West Melbourne Sep-15 $8.8m 870 $10,115
88 Miller St, West Melbourne Aug-15 $2.4m 313 $6,644
43 Dudley St, West Melbourne Apr-15 $6.83m 684 $9,990
420 Spencer St West Melbourne Feb-15 $29m 2,250 $12,889