Small deals have medium impact in a year to forget

A LATE flurry of small deals has capped off a year in which private investors emerged as dominant buyers.

But while investment by private players surged, the total value of Victorian commercial sales slumped dramatically, down from $3.464 billion in 2011 to $1.883 billion in 2012, according to Knight Frank.

Private players made up 38 per cent of all commercial, retail and industrial purchases this year, said the firm's Victorian managing director, James Templeton.

"The St Kilda Road/Southbank and the suburban office markets were the only sectors to record rises, with investment in the former experiencing the highest increase, from $98 million in 2011 to $186 million in 2012," he said.

CBD office turnover fell from $1.424 billion in 2011 to $804 million in 2012 with Australian real estate investment trusts, unlisted funds and offshore buyers continuing to invest.

Private investors dominated the retail, industrial and suburban office sectors.

They accounted for $306.7 million of the $369 million in retail sales, $103 million of the $363 million of industrial property exchanged and 73 per cent of the $158 million of suburban office assets sold, according to Knight Frank.

Unlisted funds and syndicates were the second-highest investors, accounting for 21 per cent of total turnover, or $383 million in sales. AREITs purchased 17.8 per cent, or $325 million of assets.

Investment from offshore buyers fell significantly, from 48.9 per cent of the 2011 total to just 16.5 per cent of the 2012 total sales this year, Mr Templeton said.

Owner-occupiers are moving to capitalise on low interest rates and were becoming more active, agents said. In the industrial market their share increased from just 2.7 per cent of sales in 2011 to $41.9 million, or 11.2 per cent this year, according to Knight Frank.

Businesses looking to take advantage of low interest rates were switching from leasing to owning, CBRE's Tom Tuxworth said. Four strata properties sold in the past week to owner investors, he said.

They include level three at 458 Swanston Street ($490,000), Suite 402 at 140 Bourke Street ($752,000), Suite 1&2 at 552 City Road ($1.11 million), and Suite 2.07 at 150 Albert Road which sold for $1.425 million.

Lemon Baxter agent Jay Pavey said South Melbourne, Queens Road and St Kilda Road were particularly attractive.

In the past 12 months, a number of properties of between 40 and 50 square metres have sold for $150,000 to $200,000 in those areas, he said.

"For many first-time investors, or smaller investors looking to build a portfolio of properties, the option of investing in strata title commercial property can be very attractive," Mr Pavey said.