Australian office sales jump to $17.9bn

Sydney recorded the equal biggest compression in prime yields to average just 4.6%. Picture: John Grainger
Sydney recorded the equal biggest compression in prime yields to average just 4.6%. Picture: John Grainger

Australian office sales have soared to $17.9 billion in the first three quarters of the year as local buyers have taken on offshore companies and used their capacity to raise fresh equity to snare assets.

Big players including Dexus, GPT, Mirvac, Growthpoint, Crom­well and funds run by Centuria and Charter Hall have raised to purchase office blocks, driving a 50 per cent jump in the rate of sales on last year. Major deals are still pending across major capitals, with a traditionally strong fourth-quarter finish expected.

CBRE head of capital markets research Ben Martin-Henry said investor appetite and big-ticket purchases underpinned the bumper sales result, despite the number of individual transactions falling to its lowest level since 2013.

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

CBRE head of capital markets, office, Flint Davidson, says GIC’s $900 million sale of a half interest in Chifley Square to two wholesale funds managed by Charter Hall and Cromwell’s $525m million acquisition of 400 George St in Brisbane show the size of assets trading.

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

CBRE research showed NSW recorded the highest tally of sales in the September quarter at $5.5 billion. “The number of deals recorded in NSW is broadly similar to 2018 but the average price paid at $173m is the highest on record,” Davidson says.

In Victoria, $3.4 billion in transactions took place in the first three quarters. Queensland volumes jumped to $2.7 billion as investors chased the state’s high yields.

Sydney and Perth recorded the biggest compression in prime yields to average just 4.6% and 6.3% respectively.

Yields have also compressed in Melbourne to 4.8%.

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