This article is from the Australian Property Journal archive
INVESTMENT into Australian office towers and workplaces surged by 58% in 2024 to nearly $9 billion worth of deals, with offshore buyers dominating the Sydney CBD market.
The pricing expectations gap between buyers and sellers in Sydney has reduced significantly – from 21.6% at the end of 2023 to 6.7%, according to the Australia Capital Trends report from MSCI – allowing for more deals to be struck, albeit with many assets trading well below book value.
JLL Research showed Sydney CBD attracted nearly half of the national transaction count at $4.38 billion – almost double the previous year’s tally of $2.2 billion.
Offshore investment levels rebounded strongly, with foreign investors making up 52% – or $4.68 billion – of 2024 national office sales volumes, compared to 16% ($921.2 million) in 2023. The figure also came in above the 10-year average of offshore investment activity as a proportion of overall office investment volumes of 42%.
Offshore investors made up 78% of Sydney CBD 2024 volumes, which Luke Billiau of JLL said the highest proportion of offshore investment activity on record for this market.
“Investor confidence is rebounding in the Australian office market although most of the interest is concentrated on the core eastern seaboard markets, largely the Sydney CBD.
“The Sydney CBD offers exposure to a global gateway city that has recorded robust office demand and where solid income growth is flowing through for quality assets.
The year finished on the high, with the December quarter national office volumes were the strongest quarterly result since late 2022.
The five biggest deals in 2024 were all in the Sydney CBD, with four of the five buyers being offshore investors. Singapore-listed UOL Group Limited and its subsidiary, Singapore Land Group Limited have just settled on their $460 million acquisition of a half-stake in the A-grade office tower at 388 George Street, on a 6.2% yield.
The top three foreign buyers of office in 2024 were from Japan ($1.4 billion or 16% of overall volumes), Singapore ($1.2 billion or 14% of overall volumes) and the USA ($823 million or 9% of overall volumes).
Japan’s Mitsui Fudosan acquired a circa 66% stake in 55 Pitt Street, Sydney for $1.3 billion in the middle of the year, following Singapore-listed diversified property trust Keppel REIT picking a 50% stake in 255 George Street in the CBD for $363.8 million on a 6%-plus yield.
Four of the top five transactions assets were located in the core precinct of the Sydney CBD, which has been characterised by strong demand and strong rent growth over the past three years, JLL’s Paul Chapko said.
“The strong office demand numbers we are recording for the Sydney CBD is supporting the investment thesis for investors,” he said.
The office leasing market recorded just over 86,000 sqm of net absorption over 2024 which was the strongest annual result since 2015.
“Another positive is that sublease availability in the CBD is currently at the lowest level in over four years which is an indication that the majority of corporate Australia had adjusted their office space needs to the new ways of working,” Chapko said.
