commercial buildings
Office market investment accounted for 60% of total transaction volumes. Source: Jimmy Chan from Pexels.
  • 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.

The Property Tribune has also followed this recovery trend, reporting on the large volume of commercial properties auction in a single day last month (also see here and here).

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.

Source: Real Capital Analytics; Cushman & Wakefield

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.

Source: Real Capital Analytics; Cushman & Wakefield

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.

You May Also Like

Seashells to operate Middleton Beach Hotel

Seashells Hospitality Group have been announced as the operator for the 80 plus room facility…

Vicinity Centres value down $570M following six-month decline

Retail property posts lower valuation following tough pandemic lockdowns…

Quay Quarter reaches 85% pre-commitment rate a year prior to completion

Despite being a year out from completion, 85 per cent of AMP’s Quay Quarter has been pre-committed by tenants..