This article is from the Australian Property Journal archive
THE year ahead will be more of the same with increased investment transactions and at the same time, occupier demand for office space is expected to pick up, according to Colliers International.
Colliers International’s 2015 Asia Pacific Property Outlook report said 2014 saw domestic investors dominated along with foreign investors, with new groups emerging, including sovereign wealth, insurance companies and developers from China.
Australia was a destination for six of the top 10 global investors, with most of these groups were looking to buy CBD office properties.
The report said new investors that could possibly emerge in 2015 include Taiwanese insurance companies and Japanese pension funds.
“Ownership of Australian property continued to become concentrated amongst fewer owners,” Colliers Australia & New Zealand CEO John Kenny said.
“Strong flows of capital continued to enter the Australian property market both from offshore and overseas.
“By mid-November, transaction volumes were well up on 2013 levels and although total volumes are still some way off the 2007 peak, some sectors such as the national industrial market and the Melbourne CBD office market have now exceeded volumes in that year.
“The majority of sales are now to Australian investors. This is not surprising given that Australian investors are now recognised as the most confident in the world, according to our most recent Global Investor Sentiment Survey,” he added.
Colliers Asia CEO Dennis Yeo said there is pent-up underlying demand from investors, primarily due to the lack of stock, and that will gradually be satisfied.
“However, there are increasing challenges for investors looking overseas, not least the narrowing of the gap between yields in Asia and in overseas markets,” he added.
Meanwhile, Colliers forecasts a more positive outlook for 2015 for the leasing market.
“We are seeing improving signs in the occupier markets in both Australia and throughout Asia. Although vacancy rates continued to rise and incentives stayed at high levels in 2014, tenant enquiry began to increase with the Sydney CBD showing the biggest jump in Australia,” Kenny said.
The report also looked at structural change, which will become more apparent with improvements to technology.
“Similarly, workplaces continue to evolve and change as technology makes us more mobile. An explosion in the amount of data is starting to change the way that we interact with buildings and allows owners to optimise building performance,” national director of research Nerida Conisbee said.
“Technology changes are cutting across all sectors. Whether it be 3D printing starting to change manufacturing processes, online retailing continuing to evolve and change the way we shop or websites such Airbnb and Uber changing the way we travel for work or leisure,” she added.
Capital markets and investment services managing director John Marasco said despite new forms of capital emerging, ownership is becoming increasingly concentrated amongst fewer owners. Lend Lease now own the majority of CBD development sites and GPT are now the dominant owners of prime CBD office in Melbourne, whilst Dexus similarly dominates the Sydney CBD.
As a result, Colliers is forecasting a continued move away from core assets in 2015.
“Core property continues to attract the most capital and the gap between prime and secondary yields remains historically high across all sectors.
“In 2014, we did start to see a small group of investors begin to move away from core assets and towards markets and sectors that are higher yielding or have development potential. The most obvious of these were a large number of Asian developers buying secondary CBD office buildings in Melbourne and Sydney to convert or redevelop for residential purposes. This resulted in some yield compression in both these cities,” Conisbee said.
“Other non-core investment categories that started to see strong interest were metropolitan office markets. Sectors such as retirement living, which have attracted very little institutional interest since the GFC, began to develop a higher profile. Similarly, New Zealand began to attract more interest from offshore investors. This trend is likely to continue in the year ahead,” Conisbee concluded.
Australian Property Journal
