Chinese buyer nets IKEA warehouse for $17m

An Abbotsford warehouse leased to Swedish furniture goliath IKEA has sold to a Chinese investor for more than $17 million.

The large 3600sqm building occupies a 4616sqm site, and found a buyer at $17.3 million on a sharp 4.88% yield.

The warehouse and office building at 30-36 Grosvenor St sits in very close proximity to the brand’s major store at Victoria Gardens Shopping Centre, and returns annual net rent of around $845,000.

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While the pocket of Abbotsford in which the warehouse sits is rife with development, the IKEA site is zoned Industrial 1, meaning it can’t be developed unless it is rezoned in the future.

CBRE’s Mark Wizel says the investment is likely a longer-term play from the investor, with the potential that the site could be transformed for other uses in the future.

“The property would obviously need to be rezoned for future development, but the sale continues the evolving trend of Chinese capital away from immediate development plays into more of a sit and watch play as opposed to set and forget,” he says.

While Melbourne’s development market is currently in a funk, with overseas developers selling out of sites purchased in recent years, Wizel says that Chinese buyers are always on the lookout for potential opportunities, particularly if the market lifts.

“The Chinese have a reputation for being highly attuned to emerging market trends with the ability to respond, in quickly putting their new product to market.”

“Conventional wisdom would suggest this area is ripe for rezoning to higher value uses. It will be interesting to watch how it all plays out in the ensuing few years.”