Adelaide’s commercial property market continues to gain momentum, with a tranche of record deals in the second half of 2016 helping pave the way for a bumper year.
CBRE Capital Markets Associate Director Ben Heritage said Adelaide had emerged as the star performer of Australia’s property market in 2016, with increasing competition from Melbourne and Sydney investors helping drive record results.
“In 2016, we witnessed a record number of sales and yields achieved in the sub $10 million range, where prices achieved were at levels not seen since pre-GFC,” Mr Heritage said.
“We are continuing to see a lot of interstate investors from the eastern seaboard enter the Adelaide market as they’re seeing value in the yield discrepancy when compared to their local markets where yields of similar assets can be as low as sub 5%.”
Between 2015 and 2016, CBRE Adelaide sold in excess of $490 million worth of real estate in the sub $15 million category, with the majority of these sales undertaken in 2016 and reflecting an increase of 82% in total dollar value from the year prior.
“This record result was largely driven by the leased investment market and an increase in capital coming from the eastern seaboard,” Mr Heritage said.
Conditions continue to look positive for Adelaide’s commercial property market, helping to position it as one of Australia’s most compelling investment destinations.
“This momentum has been building over the past two years, underpinned by factors such as record low interest rates, uncertainty in the commodity and share markets, and banks’ stance on lending,” Mr Heritage explained.
“We expect this to continue throughout 2017, with retail, medical and childcare leased investments driving the market. These assets are becoming increasingly attractive to investors, offering lease terms of 10 - 15 years and achieving yields of between 5% and 6% - something that has not been seen in the Adelaide market previously.”
Residential development sites within 5km – 7km radius of the CBD are also driving demand in the market, particularly in the inner western suburbs and city fringe.
Mr Heritage said an upturn in the number of off-market deals being done highlighted the strength of demand for assets.
“Both local and interstate buyers are prepared to pay higher prices to secure opportunities before they go to the open market, with unabated demand continuing to be seen for blue chip investments.”
He added: “2017 should be viewed as a year of opportunity and can certainly provide property owners a lot of confidence moving forward.”
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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 (based on 2016 revenue). The company has more than 75,000 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.