Sydney, 2 October 2013– Investment activity in the Australian commercial property sector is continuing to strengthen, with new CBRE data showing that September quarter 2013 sales were up 51% on the prior corresponding period in 2012.
Sales of office, retail and industrial properties valued at over $5 million totaled $4.7 billion in Q3, 2013.
On a rolling four quarter basis, sale totaled $19.9 billion – up 34% on the prior 12 month period.
CBRE’s Head of Research for Australia, Stephen McNabb, said sales had trended higher in NSW in particular over the past 12 months, and had also strengthened in Victoria, Queensland and Western Australia.
Local investors were the driving force, although foreign investment activity strengthened considerably in the quarter. CBRE’s data shows that offshore buyers accounted for deals totaling $1.1 billion – up from just $500 million in Q2.
“The net balance sheet exposure of foreign investors grew by an additional $900m during the quarter and now totals over $13 billion since 2007,” Mr McNabb said.
“However, while Australia remains an attractive destination for foreign capital, Australian based investors remained the key driver behind sales activity in the quarter as local fund asset allocations normalised, benefitting both equities and property.”
CBRE National Director, Capital Markets, Josh Cullen said the east coast markets had dominated activity in Q3.
“We are seeing continued increased levels of interest for core stock in all markets from both domestic and foreign investors,” Mr Cullen said.
“We expect this level of demand to continue into Q4 and a further tightening in core cap rates as supply levels tighten.”
By sector, CBRE’s data shows that NSW office sales were particularly strong in Q3, accounting for four of the top five sales in the September quarter. These included the sales of 200 George Street (50% interest), 1 Martin Place and 100 Miller Street, North Sydney.
Mr Cullen said this level of interest was expected to continue and there had been a notable number of new offshore private investors looking for opportunities in the sub $50 million price bracket.
Also noteworthy was the level of activity in the bulky goods sector, which accounted for over $600 million of the $1.5 billion of retail transactions in the quarter – the second highest level of quarterly transactions since 2007.
“Improvements in domestic housing fundamentals and a re-acceleration of population growth are expected to support rent growth within the bulky goods sector in most states in the latter half of 2014, following a generally soft environment in recent years,” Mr McNabb said.
“These expectations may support further sales activity and a stabilised to improved outlook for yields in the sector, relative to “prime” retail assets.”
In tandem with the pick-up in overall sales activity in Q3, CBRE data shows that prime yields continued to compress across all asset classes during the quarter.
However, Mr McNabb said the rate of yield compression was expected to slow in markets challenged by cyclical and structural factors, for instance the office sector, while the retail sector was expected to benefit more from improving income growth fundamentals through 2014.
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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 2012 revenue). The Company has approximately 37,000 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 website atwww.cbre.com.au.