Waiting game over as investors rejoin the hunt to make a deal
LOW interest rates and attractive yields are likely to spur pent-up demand for commercial property from private investors this year, agents say.
Many buyers who were waiting on the sidelines are now searching for property, attracted by better returns following the fall in interest rates.
A spate of recent holiday-period sales were evidence of that, agents said.
In December, the Reserve Bank of Australia cut the cash rate by 25 basis points to 3 per cent, the lowest level since it started setting rates in 1990.
"With cash rates coming down to all-time lows, people are not prepared to sit on cash any more," Lemon Baxter director Paul O'Sullivan said.
"Anything on the market will be highly sought after, with yield compression sharpening by 0.7 to 1 percentage point," he said.
Private investors and small boutique syndicates were proving the most active, MP Burke Commercial director Pat Burke said.
The metropolitan office market was well placed for a strong year, particularly in the $10 million-plus price range, Colliers national metro markets director Peter Bremner said.
Last year, about $400 million worth of metropolitan office property sold in 21 transactions, he said. In 2011, there were just 17 metro office sales above $5 million, totalling $140 million.
"The majority of buyers were private investors, with some activity from syndicates and owner-occupiers, and noticeable emerging interest from super funds," Mr Bremner said. "We are definitely seeing more private investors and super funds keen to take advantage of low interest rates and the attractive yields."
Capital values in Melbourne's city fringe market ranged from about $3500 per square metre to $5000 a square metre, with yields averaging 7.75 to 9 per cent, according to Colliers.
In the popular inner east, capital values were around $4500 a square metre, with yields about 8.25 to 8.5 per cent.
Investors were now not only "making money on their equity, but they're also making money on debt", Dawkins Occhiuto director Andrew Dawkins said. "It's pretty compelling."