Major deals put $29bn Australian record within reach
Commercial property volumes are tracking below last year’s record volumes but a series of major office and retail portfolios are close to changing hands, potentially lifting this years’s sales closer to the $29 billion record.
While some of the largest ever individual office sales have been struck recently, with Dexus Property Group and its funds last month buying a half sake in Sydney’s $1.4 billion MLC Centre, pending deals for stakes in Brookfield’s $1.8bn Wynyard station redevelopment may be even larger.
Sales of shopping centres will also be boosted as the race for the $3.5bn Blackstone portfolio comes to a head with final bids due on July 10. Real estate agent JLL estimates there are more than $6bn worth of deals already in the pipeline.
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The agency says $9 billion worth of office, retail and industrial property has sold in the first six months of 2017, below the $12.6 billion in the first six months of 2016.
JLL head of office investments, Australia, Rob Sewell says the year heralds some of the largest offerings of office assets for many years. Local buyers are also stepping up to buy assets despite concerns that the cycle is at a high point.
“We are seeing domestic capital heavily engaged in the opportunities in the market as they recognise how scarce these big offerings are to invest in and also the strong growth prospects being offered in Sydney and Melbourne,” Sewell says.
Foreign investment is still pouring into Australia’s commercial property market. JLL says offshore buyers accounted for 30% of all transactions across office, retail and industrial property this year.
JLL head of international investments, Australia, Simon Storry says offshore investors accounted for 39.1% of transactions in 2016, so the strong level of interest is continuing. The most active foreign investors this year are from Singapore, USA and Hong Kong, he adds.
Rival agency CBRE says the second quarter of the year was stronger than the first quarter. On its numbers there was $9.9 billion of deals in the first half — a 37% decline on the same time last year.
CBRE attributes the drop to the lack of available stock rather than a fall in buyer interest, noting that yields on all asset classes had tightened nationally, reflecting higher values.
Foreign buyers are also chasing larger, institutional grade assets and on average are closing deals worth close to $80 million.
CBRE executive managing director, capital markets, Pacific, Bruce Baker says Australia remains a compelling investment destination, with investors looking further afield from Melbourne and Sydney.
“In the year ahead, we expect the search for yield will drive investors to consider investment outside of traditional markets such as Sydney and Melbourne, where yields have compressed by 140-150 basis points over the past four years,” he says.
“This is bringing more risk adverse cities such as Brisbane, Adelaide, Canberra and Perth into focus, with investors now more willing to move up the risk curve into less familiar but stable markets like Brisbane,” Baker says.
This article originally appeared on www.theaustralian.com.au/property.
