More than $1.6 billion worth of capital is active in Perth’s commercial property market, as Australian-based buyers and vendors reignite their property strategies with a fresh wave of trading.
A new CBRE Research Viewpoint: Investors Digging for Deals highlights Perth as one of Australia’s most attractive property markets in 2020, underpinned by the state’s surging mining sector and stable economy in the wake of COVID-19.
According to the report, $1.6 billion of capital is vying for approximately $350 million worth of office assets in Perth, with analysis showing for every dollar of office product available for sale in Perth, there is 4.6 times more in funds seeking to invest.
CBRE’s WA Head of Capital Markets, Aaron Desange, said while 2020 had largely constrained property market investment, the tide was beginning to turn with a resurgence in transaction activity.
“Despite concerns around the future of office, investor confidence for CBD office assets remains strong. In Perth, the CBD very much remains the state’s business hub, which is reflected in current investment appetite levels,” Mr Desange explained.
“As has been the investment case for some time, Perth offers a compelling investment profile given the attractive yield spread between eastern seaboard markets. As investors prioritise security and yield in a low return environment, Perth will continue to be a target market.”
As of September 2020, Perth prime office market yields are 6.27%, compared to 4.83% and 4.56% for Melbourne and Sydney, respectively. Looking at the major international office markets, prime yields are 2.60% for Tokyo, 2.55% for Hong Kong and 3.61% for Singapore.
Mr Desange said limited investment opportunities in the Australian office market, and globally, had created a pool of capital ready for deployment.
“Given the limited opportunities in the marketplace and $1.3 billion in unsatisfied capital from our recent campaigns, we expect demand for property to continue rising,” Mr Desange said.
CBRE Senior Research Analyst Nicholas Volk said Perth’s economy was in a favourable position compared to the rest of the nation.
“A functioning economy that has successfully combatted the spread of COVID-19 to date, has allowed businesses to reopen and continue trading, giving investors a chance to see what a post-virus landscape may look like,” Mr Volk said.
“With a performing resource sector that is bolstering the jobs market, foreign and domestic investors alike have signalled their confidence in the Perth market. Compounded by the fact that yields are attractive on a comparative basis to the major east coast markets, the volatility in equities markets and historically low bond yields are pushing investors towards stable, income producing assets.
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 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 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.
