Sydney, 1 April 2013 - Preliminary CBRE data highlights that commercial sales activity increased significantly in Q1, 2013 with circa $3.5 billion in property priced over $5 million changing hands – up 15% on the corresponding quarter in 2012.
CBRE’s Head of Research for Australia, Stephen McNabb, said the data (taking into account all sales up to March 27) signaled a healthy start to the calendar year, particularly in light of the marked pick-up in activity involving domestic investors.
The level of domestic buying was 33% higher in Q1 relative to the previous corresponding period. In contrast, foreign purchaser activity was down 31%.
Looking at the broader trend (sales activity on a rolling four quarter basis), transaction levels were also higher, with $14.3 billion in sales reported for the 12 months to March 27, 2013. This was 1% higher than the $14.2 billion in sales recorded in the 12 months to March 2012.
Domestic buying was also higher on this basis, with acquisitions up 21% over the period.
CBRE National Director, Capital Markets Josh Cullen said the reemergence of the domestic REIT’s seeking core investments across all property sectors was a positive sign for 2013.
“In the past week alone we have received in excess of $4.5 billion worth of offers with the closure of sales campaigns for Raine Square in Perth and the GE Core portfolio,” Mr Cullen said.
“The local REIT’s are well positioned with both balance sheet and wholesale capacity to take advantage of quality offerings in the market place. Leveraging has reduced to around 26% from a peak of circa 40%, which would imply funding capacity of $6 billion if leverage moved back to a still conservative level of around 32%.”
Assuming 10% of the current $30 billion in super fund cash allocations was also directed to domestic property, some $3 billion in A-REIT and superannuation money could find its way into the property market.
However, Mr Cullen said one issue was the lack of quality stock openly available and this was expected to result in cap rate compression for core assets.
CBRE’s data shows the office sector has continued to be the most traded by value, CBRE’s data highlights a sustained increased in activity in the retail sector with sales up by 22% on a rolling, four quarter basis.
“There has been a range of factors driving retail property sales activity, consistent with the mixed underlying industry drivers,” Mr McNabb said.
“This has led to diverging views on the outlook for the retail market and a re-positioning of investments in areas such as bulky goods, where yield spreads are wider and the growth outlook is softer. In some cases, we have also seen retail property traded for capital management purposes and there have been a number of receiver sales.”
In general, Mr McNabb said prime retail assets had accounted for a lower proportion of sales overall (as highlighted by the fact that regional shopping centres accounted for just $1.4 billion of the $5 billion in sales over the rolling four quarter period) and yields had remained relatively firm.
Looking at buyer types, the CBRE data confirms that domestic activity has significantly increased with A-REIT acquisitions up by $1.4b over the year to March 27, 2013 compared to the previous year. A-REITs have become net purchasers over the period.
Private investors were key domestic purchasers on a net basis during the four quarters to March 2013.
Looking at foreign purchasers, while activity has been softer, Mr McNabb said activity remained elevated compared to pre GFC (the share of total sales was 13% over the year to March 2013 compared to sub 5% in the mid 2000’s).Foreign investors remain significant net investors in the market.
“Since 2007, foreign investors’ net exposure to Australian commercial property has increased by $11billion, with almost 62% of this being in the office sector,” Mr McNabb said.
“More recently there has been stronger interest in the retail sector and higher yields have started to see some foreign investor appetite for industrial, although this is still a small contributor to overall picture.”
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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.