Commercial sales rise in Q1 2012

 

Sydney, 28 March 2012 - Commercial property sales have started the year stronger than expected, with preliminary CBRE data showing that $1.4 billion in transactions above $20 million were recorded in Q1.

CBRE Executive Director, Global Research and Consulting, Kevin Stanley said concerns during the quarter centred on financial uncertainty coming from the Eurozone which was slowing investment decision making.

However, the volume of Q1 transactions was still 18% above the Q1 average experienced since the Global Financial Crisis.

“A slow start to the investment year is not uncommon in Australia, with January a holiday month, but the Q1 volume in both 2009 and 2011 was much lower than the $1.4 billion recorded in Q1 2012,” Mr Stanley said.

CBRE Regional Director, Institutional Investment Properties, Rob Sewell said Q1 sales activity this year had been impacted to an extent by an early than usual Easter break, with many vendors having delayed marketing assets until the second quarter.

“We have a number of marketing programs ready to launch post Easter, including 6-10 O’Connell Street,” Mr Sewell said.

On the buyer front, Mr Sewell said many institutions were showing a preference for assets with higher cash yields rather than lower yielding growth assets given ongoing wariness in relation to occupier demand. 

“Overall, we are seeing a lot more depth in the buyer demand, with more core plus institutional investors in the market, however the bulk of the funds are still seeking new, core assets,” Mr Sewell said.

Trading in the quarter was dominated by a few large deals, with the sale of a 50% share of the Brisbane Myer Centre for $366 million by far the largest. ISPT purchased the share from CFS Retail Property Trust to further expand its already strong position along the Queen Street Mall, in a city fast recovering from the economic woes and the natural catastrophes of 2011.

The next largest deal was also retail, this time in Sydney, where the Home Hub Hills Centre in Castle Hill was purchased by the La Salle Australia Core Plus Fund from developer Fenix Real Estate for $180 million.

“This is a sign investors are still keen to invest significantly into a sector which has had its challenges with low consumer spending in some merchandise sectors and online retailing growing in popularity,” Mr Stanley said.

Foreign investors continued to make their presence felt in Q1 2012, purchasing 43% of all assets sold by volume. This follows a year when foreign investors purchased a record 37% share of all commercial properties sold above $20 million. Foreign investors active in Q1 2012 were all Asia-based, including La Salle Investment Management, Pramerica, Frasers Commercial Trust and Aviva Investors.

Beyond foreign investors, CBRE Regional Director, Institutional Investment Properties, Rob Sewell, said the other major investor groups continued to be those most nimble, such as the local wholesale funds (26% of all purchases) and local private investors (20%).

Across the property sectors, retail was the most heavily traded making up 51% of turnover (well above the typical share of about 35%). This was heavily influenced in Q1 by the major deals in Brisbane and Sydney, as outlined above.

Mr Sewell said the office sector would normally be the most traded asset class, accounting for about 50% of all sales. However, in Q1 2012 office sales accounted for 37% of the total.

“We think the prospects for rental growth in the office sector are still the brightest of all the asset classes and local and foreign investors continue to weigh solidly into the sector,” Mr Sewell said.

Industrial property accounted for 12% of Q1 sales transactions.

“Industrial is a very tightly held sector and Q1 was typical of this characteristic, despite the high demand for the asset class from both private and institutional investors,” Mr Stanley said.

Geographically, Mr Stanley said it was worth noting the major deviation from trend was Queensland, which enjoyed 54% of all trading activity; this share would typically be about 20%.

“It appears investors are looking beyond the troubles of the past few years to the stronger economic growth which is now forecast to return to the Sunshine State.”

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About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue).  The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.au.

For Australian/international news or global stories, follow us on Twitter.

ABOUT CBRE GROUP, INC.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2011 revenue).  The Company has approximately 34,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com.au.