High-Net-Worth Family Offices Spurring Ultra-Luxury Commercial Projects

A fascinating new commercial property opportunity to provide ultra-premium office space for affluent family businesses is gaining pace in Victoria and more broadly.

While it is a slim component of the Victorian commercial property sector, this style of office product is in high demand, with square metreage being snapped up quickly in both the CBD and inner-suburban areas.

As a vertical, the number of family offices operating nationally is booming, with KPMG data revealing that roughly 2000 of them are listed throughout Australia – a 150 per cent increase over a decade.

Our specialist property agents expect this trend to continue on its upward trajectory this year – keep reading to learn why.

Owning v Leasing Ultra-Luxury Office Product

Acquiring new and heritage commercial properties, popularised by desirable locations like Melbourne’s East End, as well as their ultra-luxurious amenity, has captured the attention of high-net-worth family investors.

Perhaps most interestingly is that in many instances, developers and asset owners are offering entire strata-titled floors for sale only, with leasing these spaces not an option.

That said, strata ownership can often be considered more favourable than leasing among well-off families, but it comes with eye-watering price tags soaring to nearly $20,000 per square metre.

Founder of developer Time & Place, Tim Price, believes the popularity of purchasing is because it provides a business entity with an opportunity to acquire “and hold something of significance”, as he discussed their $200 million Hotel Lindrum transformation project on Flinders Street with the AFR.

This development will commence in Q1 2024 and has seen the property recategorised from residential hotel to office, offering wealthy family businesses opportunities to purchase full floors spanning 400 – 600 square metres.

In November 2023, Time & Place had received seven of 21 full-floor precommitments. The largest floor is speculated to have a value of roughly $11 million.

Why Ultra-Luxe Commercial Property Is Becoming Popular

Another big drawcard for the luxury office movement is the building amenity offered within these properties, as well as the neighbouring social, lifestyle and transport amenity.

For example, Time & Place’s revised plans for the iconic Hotel Lindrum site will inject 10,008 square metres of opulent office space across its 21-storeys, supported by an expansive ground-floor event area and vast club house-style conveniences for tenants – similar to that offered by the property in its era trading as a five-star hotel.

Located at 26-30 Flinders Street, the building offers a rear entry to the high-end dining and retail precincts of Flinders Lane, enjoys virtually direct access to Batman Avenue and the Monash Freeway, as well as Melbourne’s 75, 70, 48 and City Circle trams, while being just a short walk from Flinders Street Train Station.

Positive Knock-On Effects of the Ultra-Luxe Office Movement

The ultra-luxe commercial market is perhaps the most exclusive property vertical in the country, which is why it has emerged as a crowd favourite among high-net-worth clientele.

There is no denying it is a limited and lucrative sector, however it is set to create a positive ripple effect on the broader commercial marketplace for two key reasons.

Firstly, family offices occupying CBD buildings will help curtail broader vacancy rates in Melbourne, which currently sit at 15 per cent according to the latest Property Council of Australia data.

Secondly, and perhaps most importantly, this ultra-luxe trend will bring more people with disposable income back into the city – a particularly important factor for Melbourne, as its economy continues to recover from its world-leading COVID lockdown.

This segment is certainly one we will be watching closely over the few months. If you would like to learn more about this ultra-luxury office trend in Melbourne, or discuss a separate property matter, please reach out to us at info@jonesre.com.au.