Sydney leads way as commercial property investors splash $32.8bn in 2018

The Sydney CBD.

Australia’s commercial property market has recorded its slowest year since 2013, despite buyers splashing more than $30 billion on commercial assets nationwide in 2018.

Year-end data from CBRE – shows investors ploughed $32.8 billion into the market last year – with the 819 deals recorded nationally the lowest number since 2013.

Sales fell away from the heights of 2017, when $36 billion changed hands, with the drop-off attributed in large part to the ongoing decline of Chinese investment, as well as low stock levels and tighter credit controls.

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But the news was more upbeat in some states.

Investment in Melbourne jumped 12%, driven largely by a 50% increase in retail property purchases, while Perth also showed signs of a fightback with a 6% growth in investment and its highest number of transactions since 2013, off the back of a 51% increase in office transactions and double the amount of overseas investor activity.

Sydney and Brisbane experienced declines of 17% and 14% respectively, however Sydney was still the largest market for investors with $12.5 billion worth of sales. Melbourne recorded $8.5 billion, Brisbane chalked up $5.4 billion and Perth reached $2.2 billion.

Commercial property Australia Melbourne foreign investor investment

Melbourne was one of the only Australian cities to experience growth in 2018, with a 12% increase in investment value.

However the true figures for each city are almost certainly significantly higher, with the annual benchmark data only factoring in office, retail and industrial properties over $5 million.

Further good news could be on the way in the coming months, with CBRE’s National Director, Capital Markets – Office, Flint Davidson, saying buyers were extremely active in the shadows of 2018, meaning there would likely be a flurry of activity in the early part of 2019.

“While there remains some uncertainty around bond rates, redemptions, political instability and debt sourcing, this also creates opportunity and the fundamentals for most of Australia’s major markets remain positive, particularly in relation to the leasing market,” Davidson says.

“While stock availability remains tight in Melbourne and Sydney, we anticipate these two markets to be the most sought-after destinations for investment in 2019, while Canberra is also expected to see significant trading this year. Brisbane, Perth and Adelaide will continue to benefit from the resources recovery, with limited yield compression seen in these markets for prime stock.”

Perth lithium

Perth’s commercial property market showed signs of improvement in 2018. 

Chinese buyers – once the dominant overseas force in the Australian market – fell away further in 2018 as a result of investment restrictions, recording their lowest overall total since 2013 at just over $1 billion in deals. The United States led the way with $2.3 billion, ahead of Singapore with $1.9 billion and Hong Kong investors lifting to $1.7 billion – a 200% increase on 2017.

CBRE Head of Research, Australia, Bradley Speers says pricing and availability will likely continue to affect the Australian market in 2019.

“With a large volume of institutional grade stock transacting over the past four years, we expect investment volumes in 2019 are likely to remain subdued by comparison, with diminishing availability of stock, tighter credit controls and firm asset pricing expected to hamper transaction activity,” Speers says.

“There were some high-profile entity acquisitions in 2018 (IOF, Propertylink) and given the challenges faced by investors in trying to find quality purchasable stock, conditions are ripe for further takeover activity.”