Records smashed as investors target slice of Sydney

A “flight to quality” is pouring fuel on the fire in Sydney’s commercial property investment market, agents say.

Retail and industrial assets across the city, particularly those in blue chip locations, are shattering price and growth records, with buyers clamouring to get their hands on the best properties.

In one recent sale, a Double Bay building that is home to six shops and six upstairs office tenancies traded for $14.7 million on a yield of just 2%, which Colliers International’s Matt Pontey and Miron Solomons say is a record for the suburb.

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The property at 12 Cross St, Double Bay, traded for at a rate of $44,700 per square metre, which is also understood to be a Double Bay record.

Pontey says investors are being hyper-selective and seeking out specific properties in prime locations.

The Double Bay property has six shops and six offices.

“We are seeing investors and developers becoming more site specific as market conditions alter, there is a real search for premium assets in superior locations where there is a hive of activity. Double Bay is one of those locations with significant projects underway such as the Hunter by TOGA, 1788 by SJD Property and the impending redevelopment of the Cross Street Car Park site,” he says.

Solomons adds: “We envisage that investors and developers will continue to be more site specific and retreat into what they know best and what they feel comfortable with, which is why you are seeing strong results being achieved for assets in premium suburbs close to the CBD and close to key infrastructure projects.”

Industrial sheds aren’t traditionally renowned as ‘sexy’ property investments, however with the capital growth many properties are achieving, Colliers head of industrial research Sass J-Baleh says they’re impossible to ignore.

Demand is tipped to continue for Sydney industrial assets.

In an upcoming research paper, J-Baleh says Sydney industrial properties are currently outperforming all other capital cities, with 13% year on year capital growth for prime-grade assets and 17% year on year growth for secondary-grade assets.

J-Baleh says online retail’s growing need for storage and fulfilment centres is also a strengthening force, while the low interest rate environment continues to entice both local and offshore buyers.

“The number of large scale infrastructure projects currently under construction, coupled with the lack of stock on market available for sale and depletion of industrial zoned land across the Sydney metropolitan area have, and will continue, to be a contributing factor to the rise in land values across all sub-markets,” she says.

“Annual growth rates over the next six months are projected to remain in double digits as the construction phase of major infrastructure projects continue to progress and as serviced land supply is further depleted.”