A portfolio of apartment investment opportunities across Sydney will go to market amid renewed interest, with combined sales expected to reach $100 million.
The appetite for development sites is returning after a two-year hiatus, while demand for existing apartment blocks in Sydney’s inner-west and eastern suburbs has reached new heights.
In response to the strong market conditions, the CBRE Metropolitan Investments team is listing eight opportunities across the city in campaigns to be led by Nicholas Heaton and Matthew Fenn.
Five are sites earmarked for boutique residential developments; in Cronulla, Drummoyne, Newtown, Randwick and Surry Hills.
A further three apartment blocks in Coogee, Drummoyne and Randwick represent a total of 74 apartments.
“After an eight-year residential boom, a lot of our clients disappeared to Europe for two years to wait for the development market to return,” Mr Heaton said.
“Banks stopped lending, rents dropped and overseas investors fell away when it became more expensive to buy in Australia, on top of the increase in construction costs.
“Now the phone is ringing again, and we’re recording stronger than ever demand; private developers are searching for boutique projects where they can meet the demand from downsizers and investors in strong socio-economic areas.”
Of the development sites, the Cronulla and Drummoyne locations offer water views, while the Newtown and Surry Hills address also have DA-approved plans.
The Randwick site has no existing DA but would suit five luxury apartments subject to the relevant planning approvals.
CBRE’s Metropolitan Investments team has also recorded a 40% rise in enquiries for existing apartment blocks this summer.
In Coogee, a newly-available site features 28 self-contained studios, while properties in Drummoyne and Randwick feature 22 and 24 apartments respectively.
“There’s currently unprecedented demand for apartment blocks within Sydney’s inner-west and eastern suburbs,” Mr Fenn said.
“Sydney investment stock levels are so low that investors are seeking different asset classes to achieve a positive initial return.
“Office is still the top priority for investors followed by apartment blocks in-one-line throughout the metropolitan markets.”
In the team’s last apartment block portfolio, taken to market in late-2019, six addresses totalling 83 apartments traded on gross yields as tight as 2.45%.
The highly sought-after asset class typically returns gross initial yields between 3.5% and 4.5%, with average annual capital growth of 6.5% offering investors a total return of 10% per annum.
“Analysts are suggesting growth in the residential market in 2020 could exceed the average 10-year capital growth rate of 6.5%,” Mr Heaton added.
“It’s clear many buyers want a piece of the residential growth story this year.”
The opportunities in brief:
-Cronulla site: DA approval for nine, three-bedroom luxury apartments with water views
-Drummoyne site: DA approval for 17 large apartments with water views
-Newtown site: DA approval for four residential terraces
-Randwick site: Suitable for five luxury apartments
-Surry Hills site: DA approval for 12 apartments with ground-floor retail
-Coogee block: 28 self-contained studios in-one-line
-Drummoyne block: 22 apartments in-one-line
-Randwick block: 24 apartments in-one-line
For Australian/international news or global stories, follow us on Twitter: @cbreaustralia
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.