Nation leading rent growth underpins interest in Melbourne investment opportunities
Prime office assets in Melbourne and secondary assets in Sydney outperformed the rest of the country in 2017, underpinning ongoing interest in CBD investment opportunities.
29 Jan 2018
CBRE’s latest Office MarketView report highlights that rents in Sydney’s CBD secondary grade market outperformed all other markets for the second year in a row, with net effective rental growth of 20.5%.
However, CBRE Associate Director, Research, Felice Spark said Melbourne led the way in relation to prime net effective rental growth, with rents rising 15.9% over the course of the year – well above the 10-year annual growth rate of just under 2%.
“Sydney and Melbourne continued to outperform in 2017, with Melbourne recording its tenth consecutive quarter of effective rent growth as well as a decline in vacancy in Q4,” Ms Spark said, noting that the market had been supported by a 2.4% increase in white collar employment over the 12 months to September.
CBRE Senior Director, Capital Markets, Neva Courts said Melbourne’s strong fundamentals were propelling continued interest in office investment opportunities from both local and offshore investors.
This had driven a continued tightening in investment yields, which had sharpened 5 basis points in Q4 and 50 basis points over the year to reach a new benchmark of 5%.
Forecasts of continued strong rental growth have underpinned investor appetite for core Melbourne assets as highlighted by a series of significant transactions in Q4 – among them the three assets sold by TrustCapital Advisors, which received over 30 bids and set pricing records,” Ms Courts said, adding that the $100 million to $200 million price bracket was particularly competitive.
“Numerous underbidders from 2017 campaigns are yet to get set and many local funds remain underweight to Melbourne. This is expected to underpin significant interest in any available opportunities, with Melbourne still perceived to be good value relative to Sydney by both local and offshore investors.”
Offshore buyers were particularly active in 2017 accounting for 34% of Melbourne’s $3 billion in CBD office sales, up from 30% the previous year.
Ms Courts said the offshore buyer interest was extremely diverse, with significant interest from European, North American, Singaporean and Japanese investors.
She also noted that Chinese buyers were still in the market and, rather than “turning the tap off wholesale”, had shifted their interest from residential development opportunities to income producing commercial investments.
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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.