Bad day at the office for rents, but good for sales
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Investors have poured in close to $3.64 billion across medium to large towers, led by private and super funds. High-grade office towers with Green Star ratings and minimal required upgrades were the most popular.
The head of South Asia research at DTZ-UGL, Dominic Brown, said the capital inflow was a solid year-on-year increase over last year's first-quarter figure of $2.59 billion.
Private vehicles were the most active purchasers, with net investments of $788 million. Mr Brown said real estate investment trusts sold $782 million of commercial real estate, driven by the sale of several office development projects under construction.
The office sector returned to being the most favoured asset class for investors, accounting for almost $2 billion of investment in the first quarter. The deals included Mirvac's purchase of seven GE Capital office assets in Sydney, Melbourne and Perth, valued at $584 million, including 210 George Street, Sydney.
"This is the strongest quarter figure since the global financial crisis," Mr Brown said.
"After a prolonged period of net divesting, A-REITs finally returned to the black in the first quarter with net buying activity."
But this is set against a mixed outlook for the office market. In Sydney's CBD, there is limited tenant demand, which has caused rents to remain on hold, even though incentives have increased in an effort to boost activity. "With conditions forecast to remain weak over 2013 and a stronger than average supply line, rents are expected to remain largely flat for the year," Mr Brown said.
The latest CBRE global office report shows property values continued to improve, rising 0.9 per cent during the first quarter, while global office rents were stable.
The global chief economist at CBRE, Raymond Torto, said the Asia-Pacific region's office rent index had little variation over the past six quarters.
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