This article is from the Australian Property Journal archive
BUYERS have moved back to the CBD office market as national transactions increased by 25% to $6 billion from $4.8 billion a year ago, according to Savills research.
The rebound in office sales in the 12 months to June 30 follows a 46% drop in sales values in the previous year, at the height of the Global Financial Crisis.
And the number deals was down – 239 sales compared to 276 in the previous year which reflects an improvement in the value of individual transactions.
Savills NSW divisional director research Belinda Nowland said the proportion of office transaction activity has increased in the major CBDs nationally, compared to the suburban and fringe markets, to levels seen prior-GFC by value of transactions and total number of transactions.
According to Savills research, CBD markets have increased their market share of total office sales over the past year, accounting for 58.4% of sales up from 53.3% in the previous year.
Nowland said this would indicate an emerging tolerance of risk, a freeing up of cash for transactions, increasing confidence in a market that has reached the ‘bottom’ of the cycle and a rebound in overall economic activity.
NSW divisional director of city sales Ian Hetherington said there continues to be strong demand nationally for well-leased A-Grade and “value-add” assets.
“Nationally, there are at least nine transactions of over $100 million in due diligence at the moment. This is significantly higher than levels we have seen in the past couple of years.
“The vast majority of buyers are all equity funded as debt still remains a challenge, and for most buyers it is above the initial yield. We expect to see A-Grade yields consistently under 7% by year end,” he added.
Sydney CBD had the lion share of deals helping New South Wales record the biggest increase in sales – $2.2 billion up from $972 million in the previous year. Sydney CBD sales accounted for $1.7 billion of the total $2.2 billion in office transactions recorded.
Nowland said the Sydney office market has seen a number of foreign investors and local private investors purchasing prime assets over the past year in a market that is traditionally tightly held.
“With yields not plummeting, purchasers have realised there were no ‘bargains’, just opportunity in late 2009 and early 2010 to acquire long-term strategic assets.
“The Sydney office market now appears to have turned a corner in regards to tenant sentiment, demand and absorption following the effects of the GFC. Vendors who have weathered the storm now seem increasingly reluctant to sell their core properties, even at long term average yields,” she continued.
The most expensive deal was South Korea’s state pension fund’s $685 million purchase of Aurora Place.
Meanwhile Savills negotiated the $137 million sale of The Atrium in Pyrmont to Swiss-based AFIAA Foundation for International Real Estate Investments, which at the time was the largest commercial property transaction in Sydney for more than 18 months.
This year, Savills also negotiated the sale of a 50% stake in the 60 Martin Place office building in the Sydney CBD for $95 million to the Tieck family.
Victoria recorded a slight increase to $1.466 billion up from $1.439 billion, and the Melbourne CBD accounted for $687 million this year. The most notable transactions included 525 Lonsdale Street for $54 million, 50% of 1 Spring St for $67 million and 35 Spring St for $45 million.
In Queensland, sales fell to $868 million from $1.0 billion and Brisbane CBD sales accounted for $545 million.
QLD head of research Paul Day said whilst big ticket deals were affected by financing constraints, overall Brisbane sales volumes were holding up in line with long-term values.
“We have seen solid activity in the lower-to-mid levels, with the $2 million to $24 million range accounting for most sales over the last year,” he reported.
Western Australia recorded a paltry $171.4 million down from $604.0 million. In South Australia, total office sales were $378.3 million, down slightly from $407.9 million.
Australian Property Journal
