Harold Mitchell nets $49m for suburban office
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Harold Mitchell nets $49m for suburban office

Advertising guru, philanthropist and businessman Harold Mitchell has cashed in on rising values for suburban offices, selling his former headquarters in South Melbourne for $49 million.

Mr Mitchell sold Emerald House at 105 York Street, an office built for his company Mitchell Communication Group in 2010, on a new benchmark building rate of $9,600 per square metre.

“It was time to move on. That part of my life is closed. I’m happy to sell it now,” Mr Mitchell said. “We’re happy to just take it easy for a time.”

The effective rent growth in suburban offices is outperforming the CBD.

The effective rent growth in suburban offices is outperforming the CBD.

Photo: CBRE

City fringe and suburban office markets in Melbourne and Sydney are experiencing rapid growth in land values as record low vacancy rates, falling incentives and rising rents underpin a revival.

“The effective rent growth in this market is outperforming the CBD and buyers are underwriting really strong future growth assumptions which is pushing pricing to levels not seen before,” selling agent CBRE’s Kiran Pillai said.

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Mr Pillai negotiated the deal with colleagues Mark Wizel, Josh Rutman and Lewis Tong in conjunction with JACX Property director Michael Jackson.

The 5,101 sq m A-grade office has just two years remaining on a lease to Japanese advertising giant Dentsu Aegis Network who fully occupy the building.

Dentsu snapped up the remainder of Mr Mitchell’s interest in the advertising business in 2012 when it merged Aegis, to which Mr Mitchell had sold the bulk of the business to two years earlier.

Late year, the advertising identity sold his Kimberley cattle stations, the Yougawalla Pastoral Company spanning more than 850,000 hectares with 45,000 head of cattle, for $72 million.

He retired from the merged Dentsu Aegis Network in 2013 and has since focused on philanthropic endeavours including the Florey Institute of Neuroscience and Mental Health and the board of the New York Philharmonic.

Dentsu Aegis has a leasing requirement of 12,000 sq m circulating among Melbourne landlords, despite having the option to extend its lease at York Street.

The agency is looking to consolidate multiple offices under the one roof in a location industry sources suggest will be larger than Emerald House.

Another rich-lister is selling an office in the same area.

Grahame Mapp is offloading the York Butter Factory at 180 Bank Street, an art deco office building fitted out as the Omnilab film and sound studio which is expected to fetch around $30 million.

Average A grade net effective rents in Melbourne’s fringe market rose 19.1 per cent over the year to June, according to Savills Australia.

Sydney’s hottest office market in Parramatta reported zero vacancy over the same time with net rents rising 13 per cent and capital growth greater than the CBD.

Property Editor at The Age and BusinessDay journalist for Fairfax's theage.com.au, smh.com.au, watoday.com.au and brisbanetimes.com.au.

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