Why You Should be Dining Out on Premium Hospitality Investments
Article | 2min read
by JONES REAL ESTATE on July 17, 2024
Melbourne takes its hospitality scene as seriously as anywhere else in the world.
Over the past 36-months, the sector has undisputedly shown the most resilience of any commercial real estate vertical since it was shut down entirely by the pandemic.
As the broader commercial property rebound continues, here’s why we think investing in premium hospitality and fine dining real estate presents as a strategic opportunity right now.
Understanding the Fundamentals
Generally speaking, well-known and successful hospitality properties enjoy convenient positioning in high-visitation areas with strong foot-traffic and excellent connectivity to key roads and public transport.
Our recent sale of 163 Toorak Road in South Yarra is a good case study. This heritage 500sqm red-brick building, formerly home to iconic night spot Rah Bar, adjoins South Yarra train station with direct frontage to the Number 8 tram, while sitting atop versatile Activity Centre-zoned land (ACZ1) that creates a wide range of future development opportunities.
Another listing with equally terrific credentials is Chancery Lane by award-winning chef, Scott Pickett. Located in the heart of Melbourne’s CBD in one of the city’s oldest buildings, the 629sqm property at 430 Little Collins Street is available for purchase and perhaps one of our most exciting campaigns to date.
Hospitality leases are generally longer in duration than other industries, and the incredible Chancery Lane listing is no exception. The property is secured by a brand-new ten-year lease and financial guarantees, returning a net rental income of $629,000 per annum plus GST and Outgoings.
High-end hospitality investments like the above examples allow astute investors to diversify their portfolio, while also creating peace-of-mind among asset owners by ensuring a consistent income stream from a versatile commercial property in coveted locations. And then there are the dining perks!
Tourism & Local Growth Drivers
While the effects of COVID still linger, the strong uptick of tourism numbers and the spending it brings with it has certainly buoyed the hospitality economy.
Australia’s post-pandemic recovery has driven impressive international, interstate and intrastate tourism rates to Melbourne, and we’re bullish this will continue to underpin the future productivity of the local hospitality sector.
In fact, tourism spending has grown over 30 per cent between March 2019 – 2024 to $39.3 billion according to Tourism Victoria. And a significant portion of this is being spent at Melbourne eateries and bars.
Furthermore, the Australian Bureau of Statistics (ABS) has reported that household spending habits increased from two per cent in December 2023 to 3.4 per cent in January 2024 for hospitality, specifically cafes, restaurants and hotels – insights that go against much of the commentary around our ‘cost-of-living crisis’.
Impact of the Inner-Metro & CBD Worker Populations
As many people are still choosing to work-from-home, when they are required to work from the office, teams and even entire workforces are treating this as a ‘special occasion’, with big group lunches and dinners at well-regarded dining institutions re-energising team cultures.
We also expect the opening of Melbourne’s new Metro Tunnel rail network to support the performance of the local hospitality sector, as this will create a more permeable city and make commuting via public transport even more convenient.
Our experienced commercial sales team believe that investing in premium hospitality and fine dining in Melbourne now can yield substantial medium and long-terms return for savvy commercial property owners.
If you would like to learn more about our current opportunities like Chancery Lane, or discuss a separate commercial real estate matter, please reach out to us at info@jonesre.com.au.
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