- $4.9 billion of stock has already been traded this year to date
- $6.9 billion of stock across the major cities is expected to change hands during the rest of 2022
- Knight Frank's Justin Bond expects interest from international investors to continue this year
Despite many workers continuing to work from home – or at very least an under a hybrid model – data from Knight Frank suggests that the Australian office market will witness a surge of activity.
So far this year, $4.9 billion has been traded with $6.9 billion worth of stock across the market among the six major cities of Sydney, Melbourne, Brisbane, Adelaide and Canberra expected change hands over the next few months.
Justin Bond, Knight Frank National Head of Capital Markets, said that with the momentum in place, office investment values will likely exceed the $16.1 billion recorded last year.
“We are seeing increased levels of investment opportunities coming to the market as borders open and confidence returns to the occupier market,” he said.
“We expect volumes to reach $20 billion in 2022, up 25 per cent from last year, but below the record level of $25 billion reached before the pandemic in 2019.
“Melbourne is expected to see a very strong year, with the most stock on market of any city, at $3.4 billion, driven up by the on-market sale of the Southern Cross Towers complex and 1000 La Trobe. Total volumes could approach the 2019 record of $5.2 billion.”
Mr Bond also noted Brisbane remains one of the most active markets in the nation, with current on market volumes nearing $1 billion.
“We expect increased debt costs will drive demand for greater returns and therefore influence investor appetite for Brisbane investments.”
With Perth now reopened, this makes it easier for both interstate and overseas investors to inspect asserts in person.
“With just over $400 million of stock on the market, the city is also benefitting from a strong economy in Western Australia with the office market supported by rising demand for space from the mining sector.”
Foreign investment to be a key driver
Mr Bond noted with the borders open internationally, it is expected the major markets will see increased foreign investment.
“We expect to see increased foreign investment into Australia now that the international borders have opened,” he said.
“There is sustained demand from the US, in particular North America, and Singaporean buyers, and rising appetite from major German and Korean institutions.
“This reflects confidence in the near-term outlook for occupier market recovery in Australia and the longer-term prospects for Australian cities supported by a robust labour market and a large pipeline of infrastructure investment to be rolled out over the next decade.
Justin Bond, Knight Frank
“Australia offers tremendous fundamentals for foreign investors – political stability, low unemployment, strong corporate governance, market liquidity and favourable returns comparative to other global destinations.
“The uncertainty of the situation in Europe reinforces the desire of many European investors to increase allocations to foreign real estate investments.”
He expects Asia Pacific to appeal to European capital, especially the Australian, Japanese, South Korean and Singaporean markets.
Mr Bond concluded by noting a recurring theme was to invest in energy efficient assets or partner with Australian managers who are committed to implementing ESG principles.
“As ESG becomes more pertinent for investors, we think that Australia will remain highly favoured due to our highly transparent and globally recognised ratings systems and the breadth of core assets meeting rigorous sustainability criteria,” he said
