A five-level Melbourne CBD office and retail building has sold for $11.98 million, following a competitive sale campaign that saw a Chinese investor prevail over several local and off-shore groups.

Savills Australia’s Clinton Baxter, MingXuan Li and Jesse Radisich negotiated the deal for 26-32 King Street on an extremely tight yield of 2.90 percent on behalf of a local private investor, saying the sale price highlighted the continued strong demand for premium CBD freehold properties.

“The scarcity of Melbourne CBD properties on the market, particularly below $20 million, is apparent among active buyers, resulting in significant pent-up demand,” Mr Baxter said.

The property, a retail and office building of about 1,200sq m, on a landholding of about 304sq m, is leased to multiple tenants, including 7-Eleven at ground level, and returns a net rental of $352,000 per annum.

It is located adjacent to the Rialto Towers, as well as Financial Review Rich Lister Jonathan Hallinan’s 30-level hotel development, which recently sold to InterGlobe from India.

“The buyer was seeking to secure a prime CBD asset for long-term capital growth, and this sale demonstrates the strong market appetite for premium properties generating solid income within the CBD,” Mr Baxter said.

He went on to say that the prospective buyers were attracted to the asset for its prime location within Melbourne CBD’s rapidly developing western corridor and close to the Crown Entertainment Complex.

“The explosive growth occurring in the west end of the CBD has resulted in rapidly escalating land and capital values,” Mr Baxter said.

“Literally thousands of apartments, as well as hotels and office buildings, are being built between William and Spencer streets, and the population is set to explode in the west end of the city.”

The property last traded for $5.1 million at a Savills auction in 2010, and has grown spectacularly in value by 135 percent throughout the past eight years of ownership.

Mr Li said that despite recent media reports of a withdrawal of Chinese money from the Melbourne market, Savills was “actually experiencing an uptick in capital from Asia seeking prime commercial assets.”

“We have Asia-based clients actively seeking all forms of CBD and inner-metropolitan commercial assets,” he said.

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