- Commercial real estate investment up 50% from this time last quarter
- Office market transactions accounted for 60% of total volume
- However, retail market transactions still slow recovering
- Industrial market transactions slow, but expected for a big recovery this year
Australian commercial real estate investment recorded a 50% increase on the $3 billion recorded in the first quarter of last year, according to Cushman & Wakefield’s latest quarterly Investment MarketBeat report.
Transaction volumes recorded $4.5 billion this quarter, totalling $27.3 billion over the 12 months to March.
Notable office transactions completed during the quarter included Investa and Manulife purchasing 39 Martin Place from Macquarie Group for $800 million, and the Mercatus Dexus Australian Partnership securing a stake in 1 Bligh Street for $375 million.
The increase in activity is attributed to a number of factors, including improving business and consumer sentiment as the nation recovers from COVID-19, and more notably very low-interest rates set by the Reserve Bank of Australia.
“Given Australia’s success in controlling outbreaks and functioning largely COVID-19 free, institutional investors are signalling their confidence in the recovering economy and the return of workers to the office moving ahead of many global locations,” said Simon Fenn, Cushman & Wakefield’s Managing Director.
“We are continuing to see a higher volume of office assets trading with a healthy pipeline. We are also starting to see demand from offshore purchasers trackback towards pre-pandemic levels.”
Simon Fenn, Cushman & Wakefield’s Managing Director
The commercial real estate market can be divided into four components: the office market, retail market, industrial market, and ‘other’ market – which includes alternative investments like self-storage, pubs, service stations, and student accommodation.
Office market investment continued following previous trends, accounting for a majority of transaction volumes (60%) with a Q1 turnover of $2.6 billion. ‘Other’ transaction volumes made significant gains, recording $804 million – up from $153 million during the same quarter last year.
This was boosted significantly by Aware Super acquiring a $468 million stake in the Lendlease retirement village portfolio, and the purchase of the Primus Hotel in Sydney for $132 million by Pro-Invest from the Greenland Group.
However, retail investment still has yet to recover from pre-pandemic conditions, with 17 transactions to a total value of $640 million – the lowest quarterly transaction since 2012.
Industrial market transaction volumes also cooled at $449 million, but it is expected that two big potential transactions valued total at $5.15 billion will boost 2021 volumes.
Cushman & Wakefield’s National Director of Research, John Sears said that “the current conditions provide a solid foundation for further economic recovery once an effective vaccine rollout is completed.”
Mr Sears also commented on the temporary regulations that were imposed in March last year, requiring approval for ALL proposed foreign investments into Australia, regardless of the value or nature of the investment.
“We expect demand from overseas investors to grow further once travel restrictions ease, which will also be helped if the Foreign Investment Review Board reverses additional regulations introduced during the pandemic.”
John Sears, Cushman & Wakefield’s National Director of Research
The full report is called MarketBeat Australia: Investment Q1 2021.