Big office buy-up continues in record run
Eager investors have splurged more than $12 billion on office space in Sydney and Melbourne alone in one year as the cash splash on Australian commercial property continues.
A staggering $30.6 billion was spent on office, industrial and retail space across the nation in the 12 months to September, topping a record $90 billion three-year sales run.
It comes amid hopes China will remain a key player in the Aussie market as other global investors show signs of uncertainty after Brexit and the US election.
Setting the pace: Big names rush in for office tower space
But sales receipts across the major CBDs in the last year have eased local concerns.
Key transactions this year included the $675 million acquisition of 121 Exhibition/111 Bourke St in Melbourne and the $590 million sale of 420 George St in Sydney.
Savills National Head of Research Tony Crabb says the market strength looks set to continue despite worries around stock availability.
“The demand is still there,” Crabb says. “Superannuation money, and there’s a lots of it, has to get reinvested somewhere.”
“Add private money and other institutional funds and you have a strong and growing domestic pool of capital – let alone the billions in foreign money likely to continue to seek Australian property.”
He says it is really a matter of supply.
“What we do know is that while demand may outstrip supply, we are in for another 12 months of very strong investment.”
Superannuation money, and there’s a lots of it, has to get reinvested somewhere
Office markets and offshore buyers have been the key players with foreign investors snapping up 47% (57% in CBDs) of the $16.4 billion in national office sales.
Foreign investors also accounted for 30% of retail and nearly 25% of industrial stock nationally.
Savills figures for the 12 months to September 2016 showed the market is well up on the $25.3 billion five-year average, despite a drop of $4.5 billion on the $34.53 billion outlaid in 2015.
It showed office sales at $16.4 billion were down 14% from $18.9 billion in the previous year but up on the five-year average of $13.9 billion.
Sydney topped office sales with 75 transactions accounting for $7.4 billion – or 45% of the national market. It represented a jump of 17% on the five-year average of $6.32 billion.
Further south, investors spent $4.67 billion on office property in Melbourne – up 32% on the five year average of $3.53 billion.
At $5.6 billion, industrial sales slumped from $6.33 billion the previous year but still remained ahead of the five year average ($4.5 billion).
Retail sales while dropping from $9.3 billion in 2015 to $8.6 billion to September, still remained above the $6.9billion five year average.
Foreign buyers swooped in to dominate overall acquisitions accounting for 38% of the market followed by funds (18%), trusts (16%) and private investors (13%).