PODCAST: Why private capital is feasting on Melbourne real estate

Melbourne’s commercial real estate is increasingly trading into the hands of private investors who are leveraging local knowledge and a retreat from overseas and institutional players to grow their portfolios.

Some $700 million worth of property changed hands from institutional and overseas owners to private wealthy individuals and syndicates during 2024, according to JLL, reflecting a buyer cohort that has kept the market ticking amid prohibitive factors such as high interest rates, pricing instability and increasing construction costs.

“They have the ability to act fast,” said Piper Dedrick, associate director, capital markets – office, JLL, on the Perspectives podcast, noting the ability of private investors to look beyond Melbourne’s headline office CBD vacancy figure of 19.8% to secure a good deal.

“Privates are more active because they know that a building will start performing in a year or two if it’s not today because of the location and their understand of the micro area that it sits in.

“Offshore groups with limited people on the ground and even domestic institutional groups headquartered in Sydney have trouble convincing investment committees to look through the headline Melbourne figures,” Dedrick said. 

However, after signs of a stabilising market over 2024, including alignment on pricing from owners and buyers, there is confidence in the return of institutional and international capital to Victoria by the end of 2025 and its ability to drive sustainability and placemaking to a level that privates cannot.

JLL’s head of tenant representation in Victoria, Jessica Van Raay, described on the podcast a growing confidence around Victorian employees returning to the office and the value corporate real estate decision-makers are putting on being in vibrant precincts – factors that will further influence the return of major capital.

“They’re conscious of who is in the building and what the vibe is and as a result we’ve seen a strong recovery in the east end of Melbourne. Tenants want to go there now but there are not a lot of options in that part of the city,” Van Raay said.

Podcast guest Nick Drake, JLL’s joint head of leasing in Victoria, said rental growth over the past five years is helping landlords stack up the facilities tenants expect from buildings, including business lounges, town hall space and high-quality end-of-trip facilities.

“If you look at the number of available prime office sites in the core CBD you can probably count them on one hand. The market will only tighten further and we’re going to start seeing greater rental growth,” he said.

Click here to hear more from Drake, Van Raay and Dedricks in the full podcast episode.