CBD office properties going to offshore buyers
2015-10-29
Offshore buyers have spent $1.3 billion on investments in Melbourne's CBD, accounting for 78 per cent of all the deals to date in 2015, according to a joint report by the Australian Property Institute and Knight Frank.
The highest level of spending on record, it has already surpassed the entire sum outlaid on commercial investments in 2014, according to Knight Frank joint managing director and API office spokesman Joe Perillo.
But the deals are not purely investment-driven.
"There is heightened pressure for properties or sites suitable for redevelopment," Mr Perillo said.
"There are a number of sites in Melbourne's CBD which are investment-grade but they're essentially landbanked. That's led to a situation where the gap between secondary assets and A-grade assets has virtually disappeared in terms of yields, because the underlying land value is so strong," he said.
By July 2015, prime office yields compressed a further 55 points to between 5.5 per cent and 6.5 per cent. This puts average prime yields at 102 basis points below the 10-year average and lower than the previous CBD office benchmark lows set in 2007 before the global financial crisis.
Tenants are flocking to the CBD. The net absorption of office space in the six months to July 2015 was twice the historical rate, totalling 60,906 square metres, a five-year high.
Consequently, total vacancy levels fell to 8.1 per cent from 9.1 per cent at the start of the year, with levels tipped to fall to 6 per cent by July 2016.
CLSA analysts Michael Scott and Sholto Maconochie have forecast improved office markets in Australia but warned incentives were still high and income growth remains flat.
The CBRE Sublease Barometer shows a fall of 11 per cent in the past quarter to 68,100 square metres, with shrinking businesses accounting for 70 per cent of the available space.
But employee numbers in the technology sector are strengthening, with sublease space in this area halving to 8600 square metres.
CBRE regional director of office services Andrew Tracey said, "Melbourne emerged the strongest market during the period, with availability dropping for the third consecutive quarter."
Source:http://www.smh.com.au/business/property/cbd-office-properties-going-to-offshore-buyers-20151027-gkjo9d.html
But the deals are not purely investment-driven.
"There is heightened pressure for properties or sites suitable for redevelopment," Mr Perillo said.
"There are a number of sites in Melbourne's CBD which are investment-grade but they're essentially landbanked. That's led to a situation where the gap between secondary assets and A-grade assets has virtually disappeared in terms of yields, because the underlying land value is so strong," he said.
By July 2015, prime office yields compressed a further 55 points to between 5.5 per cent and 6.5 per cent. This puts average prime yields at 102 basis points below the 10-year average and lower than the previous CBD office benchmark lows set in 2007 before the global financial crisis.
Tenants are flocking to the CBD. The net absorption of office space in the six months to July 2015 was twice the historical rate, totalling 60,906 square metres, a five-year high.
Consequently, total vacancy levels fell to 8.1 per cent from 9.1 per cent at the start of the year, with levels tipped to fall to 6 per cent by July 2016.
CLSA analysts Michael Scott and Sholto Maconochie have forecast improved office markets in Australia but warned incentives were still high and income growth remains flat.
The CBRE Sublease Barometer shows a fall of 11 per cent in the past quarter to 68,100 square metres, with shrinking businesses accounting for 70 per cent of the available space.
But employee numbers in the technology sector are strengthening, with sublease space in this area halving to 8600 square metres.
CBRE regional director of office services Andrew Tracey said, "Melbourne emerged the strongest market during the period, with availability dropping for the third consecutive quarter."
Source:http://www.smh.com.au/business/property/cbd-office-properties-going-to-offshore-buyers-20151027-gkjo9d.html
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