Sydney

Office sales hit record high as investors chase big-ticket deals

Australian office sales totalled $17.9 billion in the first three quarters of 2019, the highest level on record and a 50% increase on the corresponding period last year according to new CBRE data.

31 Oct 2019

Australian office sales totalled $17.9 billion in the first three quarters of 2019, the highest level on record and a 50% increase on the corresponding period last year according to new CBRE data.

CBRE’s Head of Capital Markets Research Ben Martin-Henry said investor appetite and big-ticket transactions underpinned the bumper sales result, as highlighted by the fact that the actual number of individual transactions was the lowest since 2013.

“This indicates that not only is pricing strong, but that larger assets are being traded,” Mr Martin-Henry said.

CBRE’s Head of Capital Markets – Office, Flint Davidson, said GIC’s circa $900m sale of a 50% interest in Chifley Square to two wholesale funds managed by Charter Hall Group and Cromwell’s $525m acquisition of 400 George Street in Brisbane were indicative of the size of assets being traded.

“There has been plenty of coverage of the foreign demand for Australian office assets, which continues unabated, however it is the domestic capital from private investors through to REITs that have been aggressively pursuing and acquiring assets in Australia this year,” Mr Davidson said.

CBRE’s Q3 Office MarketView report shows that NSW recorded the highest tally of sales in Q3 at $5.5 billion – up 150% increase on Q3, 2018. This boosted total NSW office sales for the first three quarters to $9.8 billion – already $2 billion above 2018.

“The number of deals recorded in NSW is broadly similar to 2018 but the average price paid at $173 million is the highest on record,” Mr Davidson said.

“In Victoria, $3.4 billion in transactions took place in the first three quarters of the year, which was a slight increase on the corresponding period in 2018. In contrast, transaction volumes increased by 25% in Queensland, with $2.7 billion in assets traded across 25 transactions as investors continue to look for better yielding assets compared to Sydney and Melbourne.”

Perth transactions were broadly in line with 2018 – primarily due to limited stock availability.

“Investors are keen to take advantage of the high yield spread to Sydney and Melbourne but are being hampered by a lack of quality stock on the market,” Mr Davidson said.

On the yield front, CBRE’s MarketView report shows that Sydney and Perth recorded the biggest compression in prime yields in Q3 to average 4.6% and 6.3% respectively.

Yields have also continued to compress in Melbourne to 4.8% - the lowest point on record. 

“With the RBA delivering three 25bps rate cuts since the federal election, the cost of borrowing is becoming increasingly cheap for investors, who are now benefitting from rates of sub 2.75%,” Mr Martin-Henry said.

“This situation is expected to continue due to an inverted yield curve, meaning that the cost of debt in the long term is expected to be lower than in the short term. This is likely to lead to lead to further compression in property yields as the demand for bonds increases.”

Download the report here. 

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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 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 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.

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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.