Super soaking up strata deals

Self-managed super funds are soaking up a large portion of Melbourne's CBD strata office offerings, agents say.

But as the market matures and starts to grow again, investors should focus on location, leasing risk, returns and amenities, an Urbis report on the sector cautions.

CBRE strata manager Tom Tuxworth said strata office sales had slowed significantly in the wake of the GFC but this year were beginning to improve.

The sector had been boosted by high-net-worth individuals and small to medium-sized businesses taking advantage of the tax treatment of property in self-managed funds, he said.

"It's the first time since the GFC that things are picking up, sentiment is stronger and people are more positive about purchasing a business premises," he said.

The Urbis report identifies about 1800 strata units within the Melbourne CBD with an average turnover each year of about 125 units, or 7 per cent of total stock.

Before 2000, most strata units were in converted and refurbished older buildings. Since then, the trend has been towards purpose-built facilities, report author Roger Scrivener said.

Two are under construction in Melbourne's CBD: the Australian Institute of Architects building at 41 Exhibition Street and Lend Lease's Lifestyle Working project at 838 Collins Street.

Mr Tuxworth said older strata office space tended to sell for about $4000 a square metre while new developments fetched up to $8000.

Of the 100 strata office transactions by CBRE in the past year, more than two-thirds were bought by self-managed funds, Mr Tuxworth said.

Funds were typically controlled by lawyers, accountants, developers, stockbrokers, architects or similar professions, he said.

More than 65 per cent of suites in the Lifestyle Working building had been sold, Colliers International's Daniel Wolman said.

The building has shared meeting rooms, bike storage, change facilities, solar power generation and a 5-star Green Star rating, he said.

Additional features were attractive to tenants and owner-occupiers, Mr Scrivener said.

Location, leasing risk, value for money and on-site facilities were critical in the success of strata office units as investments, Urbis noted.

Many strata units completed between 2007 and 2008 were marketed with rental guarantees.

"This concept was not entirely successful as it provided investors with false expectations as to the level and strength of tenant demand," the report said.

Factors that affected the success of strata developments included proximity to Collins Street and other significant office buildings and public transport, it said.

sjohanson@fairfaxmedia.com.au