Office market transactions in Q4 were led by New South Wales, accounting for almost 40 per cent of deal volume.
  • The transactions were led by the office market with volume of $16.3B
  • This was followed by Industrial & Logistics and the Alternative & Specialist markets category
  • CRE volumes showed signs of slowing amid economic uncertainty, with $9.1B in transactions recorded in Q4 2022

Australian commercial real estate (CRE) remained elevated in 2022, recording $43.6 billion in transactions according to Cushman & Wakefield’s latest Investment Marketbeat.

With a volume of $16.3 billion, the annual transactions were again led by the Office market. This was followed by the Industrial & Logistics category with a volume of $10.1 billion – its second-highest calendar year total on record. Next, the Alternative & Specialist markets category, including care, accommodation, mixed-use, service and storage assets, recorded $9.0 billion. This was also the total on record. Finally, Retail transactions finished the year with $8.2 billion.

Quarterly commercial real estate investment volume (AUD $m)

Source: Real Capital Analytics; Cushman & Wakefield

Real estate company, Cushman & Wakefield’s Managing Director, Australia and New Zealand, Simon Fenn, said he is hearing from clients that they are cautious.

“Australian commercial real estate investment records tumbled in 2021, and while aggregate volumes remained heightened last year, there was a sense of normalisation as the economic cycle turned,” Mr Fenn said.

“We saw a recalibration of the market and investor expectations over 2022 as interest rates moved higher and the yield environment shifted.”

 Simon Fenn, Cushman & Wakefield’s Managing Director, Australia and New Zealand

CRE volumes ease

While 2022 saw above-average annual investment, CRE volumes eased over the year amid economic uncertainty. During the final quarter, $9.1 billion in CRE transactions were recorded. This is down from investment volume in Q2 and Q3 of $15.9 and $10.6 billion respectively.

“We’re hearing from clients that although they’re cautious, there’s a significant amount of capital to be ready to be invested in Australia, and the fundamentals of individual properties, not just market-wide trends, are playing a greater role in decision-making,” Mr Fenn said.

Office market down in final quarter of 2022

During the final quarter of 2022, national Office market transactions eased, returning to close to the 10-year quarterly average.  Office transaction volume totalled $3.4 billion in Q4. This is down from the $5.8 recorded in Q2.

In its place, the Industrial & Logistics sector picked up in Q4 with $2.2 billion in transactions recorded.  Annual Industrial & Logistics volume was $10.2 billion, the second strongest calendar year on record, though close to 40% below the $16.4 billion recorded in 2021.

Cushman & Wakefield’s National Head of Research, John Sears sees the Australian CRE market as resilient.

“While we don’t expect a return to the outsized investment volumes levels seen in 2021 until the economic outlook stabilises, the Australian commercial real estate market continues to show its resilience and relative global advantages.”

John Sears, Cushman & Wakefield’s National Head of Research

 



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