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Low economic environment drives push to unlock hidden value in Australian real estate

Australia’s continued low growth economic environment will support a shift in investment sentiment in 2018, with strengthening appetite levels for counter cyclical opportunities and alternative asset classes amid the need to unlock hidden value in real estate

28 Feb 2018

Australia’s continued low growth economic environment will support a shift in investment sentiment in 2018, with strengthening appetite levels for counter cyclical opportunities and alternative asset classes amid the need to unlock hidden value in real estate

Australia’s 2018 Real Estate Market Outlook report forecasts the start of convergence from divergence in the commercial office sector, with all major markets witnessing declining vacancy rates and improving rental growth over the next 12 months. 

CBRE Research Associate Director Bradley Speers said 2018 would be the cyclical peak for Sydney and Melbourne – underpinning greater investment interest in locations such as Brisbane and Perth. 

“Brisbane in particular has already emerged as a counter cyclical investment opportunity – and will remain so throughout the year. We will see Perth and Canberra come more under the radar in 2018, as these markets become increasingly viewed as a favourable long-term investment hold strategy,” Mr Speers said. 

CBRE’s Executive Managing Director, Capital Markets, Pacific, Bruce Baker said both Brisbane and Perth were already attracting significant levels of interest from capital, particularly in the core and core plus office sector. 

“The availability of suitable investment product will be the main impediment to both these markets achieving record sales volumes in this sector in 2018,” Mr Baker said. 

“Both Brisbane and Perth are set to benefit from the rebound in resource prices, which will flow through to both economies and are predicted to generate significant white collar employment growth.”

The report shows disruption would also be a key theme shaping the Australian property industry in 2018, with occupiers and owners alike now recognising the importance of embracing change to create greater value. 

“The traditional real estate premise of ‘location, location, location’ is no longer everything for business success. Companies are increasingly understanding that better business performance now starts with understanding how technology could reshape their business,” Mr Speers said. 

In CBRE’s 2017 APAC Occupier Survey, 36% of major multinational corporations surveyed across the region identified technology disruption as a rising concern – up from 21% in 2016. 

CBRE Senior Managing Director, Pacific, Amanda Steele, said technology was placing people at the centre of their workplace. 

“As the workforce becomes increasingly mobile, it is not solely about where the business is located, but more about accessing the right talent for the job and providing the technology to support mobility and flexibility,” Ms Steele said. 

“Looking at the generational shift and focus on work life integration means that the workplace needs to respond to these needs. The smart-phone generation will demand flexibility and creativity in workplaces. It’s our job to respond to that.”

The survey revealed 86% of respondents believe mobility will be the biggest technology enablement, while 84% of landlords expect a rise in smart buildings as a result of the impact of technology on office demand. 

“Smart buildings will be the norm before long. They will provide greater efficiency, improved health outcomes and allow landlords and asset managers the time to focus on investment decisions.” 

Alternative asset classes will also be a key focus in the Australian property market in 2018, with the emergence of a multifamily sector to evolve over the coming years. 

“With commercial yields falling across assets classes, there is now greater focus on income stability and steady growth while limiting capital risk,” Mr Speers said. 

“The lower yields typically associated with residential assets provide a stable, long term income stream that will meet investor demand for longer duration liabilities.” 
 
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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 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.

Disclaimer:

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of 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 https://www.cbre.com.