Office market posts strong performance

Melbourne's office investment market has posted its strongest performance in a decade, with more than $1.55 billion of CBD assets changing hands in the last financial year.

Melbourne's office investment market has posted its strongest performance in a decade, with more than $1.55 billion of CBD assets changing hands in the last financial year.

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

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