New CBRE sales data highlights that a total of $32.8 billion in commercial property changed hands in Australia in 2018, with Sydney emerging as the number one destination for capital.
CBRE’s data, which takes into account sales of office, industrial and retail property valued at over $5 million, shows 2018 transactions fell 9% shy of the $36 billion recorded in 2017, with the decline partly attributed to a fall in offshore buyer activity during the period.
CBRE’s Head of Research, Australia, Bradley Speers, said offshore buyer activity accounted for approximately 28% of the total transaction volume, slightly down on the five-year average of 31%.
“Despite the slight decrease in offshore buyer activity, the average foreign investment deal size in 2018 was $74 million – significantly higher than the $34 million deal size typically seen for domestic investors,” Mr Speers said.
“This indicates that foreign capital continues to prefer institutional grade stock, with the majority of this coming from the USA ($2.3bn), Singapore ($1.9bn) and Hong Kong ($1.7bn).”
While Chinese investment remained sluggish in 2018, recording its lowest total since 2013 at just over $1 billion, Hong Kong buyers were significantly more active with a 200% increase in capital deployment. After declines in 2017, both the Americas and EMEA regions increased their investment in Australia at 9% and 34% respectively.
The data shows Sydney continues to be the preferred destination for investment ($12.5bn), followed by Melbourne ($8.5bn), Brisbane ($5.4bn) and Perth ($2.2bn).
In comparison to 2017, Sydney and Brisbane experienced declines of 17% and 14% respectively, while Melbourne recorded a 12% uplift in investment – driven predominantly by a 50% increase in retail investment.
Perth reappeared on the investment radar, with overall investment activity growing 6%, marking the highest level of transactions since 2013. This improvement was driven by a 51% increase in office transactions to over $1 billion, while offshore investment doubled from 2017, accounting for 38% of total transactions during the period.
CBRE’s National Director, Capital Markets – Office, Flint Davidson, said a significant level of buyer activity in late 2018 would translate to a strong start for transactions in 2019.
“While there remains some uncertainty around bond rates, redemptions, political instability and debt sourcing, this also creates opportunity and the fundamentals for most of Australia’s major markets remain positive, particularly in relation to the leasing market,” Mr Davidson said.
“While stock availability remains tight in Melbourne and Sydney, we anticipate these two markets to be the most sought-after destinations for investment in 2019, while Canberra is also expected to see significant trading this year. Brisbane, Perth and Adelaide will continue to benefit from the resources recovery, with limited yield compression seen in these markets for prime stock.”
Mr Speers said total transactions (819) in 2018 fell 10% to the lowest levels recorded since 2013 – illustrating how pricing and availability continue to act as the biggest obstacles to acquiring assets.
“With a large volume of institutional grade stock transacting over the past four years, we expect investment volumes in 2019 are likely to remain subdued by comparison, with diminishing availability of stock, tighter credit controls and firm asset pricing expected to hamper transaction activity,” Mr Speers said.
“There were some high-profile entity acquisitions in 2018 (IOF, Propertylink) and given the challenges faced by investors in trying to find quality purchasable stock, conditions are ripe for further takeover activity.”
*It should be noted that Oxford Properties Group’s takeover of the Investa Office Fund (~$3.4b), ESR’s takeover of Propertylink (~$693m) and Unibail Rodamco’s takeover of Westfield Group’s portfolio of retail centres were excluded from the overall figures due to them being entity deals.
CBRE’s data, which takes into account sales of office, industrial and retail property valued at over $5 million, shows 2018 transactions fell 9% shy of the $36 billion recorded in 2017, with the decline partly attributed to a fall in offshore buyer activity during the period.
CBRE’s Head of Research, Australia, Bradley Speers, said offshore buyer activity accounted for approximately 28% of the total transaction volume, slightly down on the five-year average of 31%.
“Despite the slight decrease in offshore buyer activity, the average foreign investment deal size in 2018 was $74 million – significantly higher than the $34 million deal size typically seen for domestic investors,” Mr Speers said.
“This indicates that foreign capital continues to prefer institutional grade stock, with the majority of this coming from the USA ($2.3bn), Singapore ($1.9bn) and Hong Kong ($1.7bn).”
While Chinese investment remained sluggish in 2018, recording its lowest total since 2013 at just over $1 billion, Hong Kong buyers were significantly more active with a 200% increase in capital deployment. After declines in 2017, both the Americas and EMEA regions increased their investment in Australia at 9% and 34% respectively.
The data shows Sydney continues to be the preferred destination for investment ($12.5bn), followed by Melbourne ($8.5bn), Brisbane ($5.4bn) and Perth ($2.2bn).
In comparison to 2017, Sydney and Brisbane experienced declines of 17% and 14% respectively, while Melbourne recorded a 12% uplift in investment – driven predominantly by a 50% increase in retail investment.
Perth reappeared on the investment radar, with overall investment activity growing 6%, marking the highest level of transactions since 2013. This improvement was driven by a 51% increase in office transactions to over $1 billion, while offshore investment doubled from 2017, accounting for 38% of total transactions during the period.
CBRE’s National Director, Capital Markets – Office, Flint Davidson, said a significant level of buyer activity in late 2018 would translate to a strong start for transactions in 2019.
“While there remains some uncertainty around bond rates, redemptions, political instability and debt sourcing, this also creates opportunity and the fundamentals for most of Australia’s major markets remain positive, particularly in relation to the leasing market,” Mr Davidson said.
“While stock availability remains tight in Melbourne and Sydney, we anticipate these two markets to be the most sought-after destinations for investment in 2019, while Canberra is also expected to see significant trading this year. Brisbane, Perth and Adelaide will continue to benefit from the resources recovery, with limited yield compression seen in these markets for prime stock.”
Mr Speers said total transactions (819) in 2018 fell 10% to the lowest levels recorded since 2013 – illustrating how pricing and availability continue to act as the biggest obstacles to acquiring assets.
“With a large volume of institutional grade stock transacting over the past four years, we expect investment volumes in 2019 are likely to remain subdued by comparison, with diminishing availability of stock, tighter credit controls and firm asset pricing expected to hamper transaction activity,” Mr Speers said.
“There were some high-profile entity acquisitions in 2018 (IOF, Propertylink) and given the challenges faced by investors in trying to find quality purchasable stock, conditions are ripe for further takeover activity.”
*It should be noted that Oxford Properties Group’s takeover of the Investa Office Fund (~$3.4b), ESR’s takeover of Propertylink (~$693m) and Unibail Rodamco’s takeover of Westfield Group’s portfolio of retail centres were excluded from the overall figures due to them being entity deals.
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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 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 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.
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 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 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.
