Commercial property down $500m on record years

Vicinity Centres has sold Tweed Mall for almost $82 million.
Vicinity Centres has sold Tweed Mall for almost $82 million.

There will be no repeat of Australia’s record commercial property sales from the past two years, experts say, with the market slowing slightly in the last financial year.

Preliminary figures from commercial agency JLL show commercial property sales fell almost $500 million over the past 12 months compared with the 2014-15 financial year, despite a number of large portfolios being sold in the first six months of 2016.

The slight downturn is expected to extend through the remainder of 2016, though experts predict an improved performance in the back half of the year, with Australia still attractive in comparison to other global markets.

Australia recorded $29.205 billion worth of sales in 2015-16, down from $29.684 billion the previous 12 months, according to JLL’s data.

Sales above $5 million took some of the biggest hits in the first half of 2016, with the $9.2 billion worth of deals down from $12.8 billion over the same period last year.

Forest Hill Chase Shopping Centre has been valued at $269.8 million. Picture: Vicinity Centres.

Forest Hill Chase Shopping Centre in Melbourne’s east sold as part of the Vicinity Centres portfolio.

JLL’s head of office investments Rob Sewell says there will be no record result this year.

“While investment activity is expected to remain firm over the balance of the year, we don’t expect that transaction volumes through 2016 will match the record years seen over 2014 and 2015,” Sewell says.

Major deals such as Vicinity Centres’ $841.4 million sale in May of four shopping centres in Victoria and Queensland and September’s record $1.073 billion sale of the GIC and Frasers Property Australia industrial portfolio boosted the market’s bottom line, but weren’t enough to carry it beyond last year’s results.

But Sewell says the market is expected to stage something of a fightback, with a number of major deals likely to lift the numbers in the coming months.

“Volumes remained somewhat steady in the first half of the year although several large transactions are likely to finalise over the coming months, which will boost the overall figures by year end,” he says.

Large scale industrial facilities will be hot property in 2016.

The GIC and Frasers portfolio was Australia’s largest ever industrial sale.

“Constraining factors will be domestic banks taking an increasingly conservative view of their exposures to the real estate market, and a scarcity of investment grade assets.”

Sewell says Australia’s commercial property market remains one of the most attractive globally.

“Foreign investor interest for commercial real estate assets in Australia remains strong. While the Brexit outcome may have a short term impact on investor confidence globally, we view Australia as a potential beneficiary of market volatility,” he says.

“Recent events will only increase the appeal of a market like Australia, which provides investors with solid long-term fundamentals.”