Sydney, 2 July 2014 – Transaction activity in the Australian commercial property market is on track to reach the second highest annual total in a decade following a strong Q2 during which $6.1billion in property changed hands
CBRE’s sales data includes all office, retail and industrial sales over $5 million. It shows that for Q1 and Q2 combined, some $10.5 billion in property was transacted – just 10% below last year’s record.
CBRE National Director, Capital Markets, Josh Cullen said; “Whilst activity is slightly down, this follows a record year and demand for core assets in the Australian market remains extremely strong, as we are still very attractive from a global perspective.”
The Q2 figures also highlight that foreign investment into Australia’s commercial market has remained intact, with $2.6 billion of sales transacting in the three months to June 30 – representing 27% of all sales during the quarter.
CBRE Senior Director, International Investments, Rick Butler said 10 of the top 16 office deals this year had involved foreign investors.
“On our major sale campaigns typically half of the bidders are from offshore,” Mt Butler said.
"Even if they don't end up being the buyer they are often the Damocles Sword that helps push pricing for vendors.”
On a sector by sector basis, CBRE Australia’s Head of Research, Stephen McNabb, said the industrial market had been a stand out, in line with predictions, with close to $900 million in sales transacted. This was up from $400 million during the same period in 2013, representing a 116% increase.
“The industrial sector has attracted more interest due to high yields, and most importantly, prospects for a recovery in rent growth later in 2015 together with the economic cycle with a particular focus on super prime logistics assets,” Mr McNabb said.
Chris O’Brien, CBRE’s National Director of Industrial Investments, said the biggest shift in the market was the increased focus on higher risk assets.
“There is still a flight to quality stock, however we are seeing an increasing amount of investors diverting their attention to stock with leasing risk, or in some cases full vacancy. This in turn is contributing to a compression in yields for the non-core industrial investment stock, and we are witnessing an increase in portfolio sale activity,” Mr O’Brien said.
From a retail perspective, CBRE National Director of Retail Investments Neil Proudlove the occupier market still had some challenges and stabilised income was more of a focus than short term income growth. However, the investment market remained very active across the spectrum from large format centres to major regional assets.
“There is a high degree of investor demand and investment yields have firmed – a trend which is forecast to continue for the rest of 2014,” Mr Proudlove said.
A state-by-state analysis shows sales activity in Sydney and Melbourne was up 10% and 22% respectively in Q2, relative to the same period in 2013. Brisbane sales were 33% lower than the previous year’s levels, however, this was largely due to the strong Q2 experienced in 2013.
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