Office market posts strong performance
The soaring value of transactions - up 134 per cent in 12 months - has come on the back of five recent deals worth more than $1 billion for 567 Collins Street, 90 Collins Street, 8 Exhibition Street and 313 La Trobe Street.
Research from Savills Australia also shows that trusts and funds have become the dominant buyers in the CBD market, accounting for 66 per cent of purchases compared to just 38 per cent in financial year 2011-12.
It marks a dramatic surge in activity for institutional investors, which recorded no sales during the global financial crisis and the two years that followed.
"Institutional investors had been largely sidelined from the market, with finance difficult to obtain and lenders scrutinising the loan-to-value ratios of portfolios," Savills' Victorian head of research Glenn Lampard said.
"That situation has now turned around, with institutions having repositioned themselves and now seeking good-quality assets."
But interest from foreign buyers has eased off substantially, falling from 34 per cent to 23 per cent.
Savills recorded 25 commercial office sales worth $1.55 billion in 2012-13, compared to 13 sales worth $663 million in 2011-12.
The biggest transaction involved Investa's Office Fund and Commercial Property Fund spending $460 million on Leighton's 567 Collins Street development.
Cbus Property and Commonwealth Property Office Fund sold 50 per cent stakes in 8 Exhibition Street to GPT Wholesale Office Fund and Singapore-owned Keppel REIT for a combined value of $320 million.
Mirvac Property Trust paid $170 million for GE Real Estate's 90 Collins Street building, while offshore group Invesco has taken a half stake at $113 million in Cbus' 313 Spencer Street police complex.
Jones Lang LaSalle's Victorian head of sales and investments Robert Anderson said the market was overwhelmingly being driven by demand for super-prime office assets. "The next six months will see a bounce back in leasing activity and that will have the impact of creating a more positive investment environment for that end of the market."
cvedelago@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
Melbourne's CBD office market saw a surge in large transactions and renewed institutional demand: more than $1.55 billion of assets changed hands in the last financial year (up 134% year-on-year), driven by several high‑value deals and growing buyer activity from trusts and funds.
The rebound was anchored by a handful of big deals, including Investa's Office Fund and Commercial Property Fund spending $460 million on Leighton's 567 Collins Street development; Cbus and Commonwealth Property Office Fund selling half stakes in 8 Exhibition Street for a combined $320 million to GPT Wholesale Office Fund and Keppel REIT; Mirvac paying $170 million for 90 Collins Street; and an offshore investor, Invesco, taking a half stake for $113 million in Cbus' 313 (referenced in the article as the Spencer Street police complex).
Research from Savills Australia shows trusts and funds have become the dominant buyers, accounting for 66% of purchases in the last financial year compared with 38% in 2011–12, signalling strong institutional participation in the CBD market.
According to the article, foreign buyer interest has eased substantially — falling from 34% of purchases to 23% — even as local institutions have ramped up activity.
Savills recorded 25 commercial office sales worth $1.55 billion in 2012–13, up from 13 sales worth $663 million in 2011–12.
Savills’ Victorian head of research, Glenn Lampard, said institutions were largely sidelined after the global financial crisis because finance was hard to obtain and lenders were scrutinising loan‑to‑value ratios. The situation has turned around, with institutions repositioning and now actively seeking good‑quality assets.
The market is being driven by demand for super‑prime office assets, according to Jones Lang LaSalle’s Robert Anderson. That focus on top‑quality assets suggests investor interest is strongest at the premium end of the market.
Robert Anderson expects a bounce back in leasing activity over the next six months, which he believes will create a more positive investment environment—particularly for super‑prime office assets.
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