Australian commercial property sale value well down in first quarter
Sydney office deals worth $2 billion were sealed during the first quarter of 2021, according to RCA research.

Australian commercial property sale value well down in first quarter

Bullish foreign raiders put a floor under the falling transaction tally in the commercial property sector during the first three months of 2021, which featured the lowest level of domestic investment in more than five years.

New research from Real Capital Analytics revealed that the $5.9 billion value of commercial property sales during the period was 19 per cent down on 2020.

RCA said domestic investor transactions fell 42 per cent year on year to $3.4 billion, while the value of properties bought by international entities rose 83 per cent, reaching $2.5 billion.

“Cross-border activity could have been higher if Foreign Investment Review Board approvals had been expedited for several high-value transactions,” the report said.

North American investors were most aggressive, spending $1.5 billion on a range of commercial assets, closely followed by the ever-present Singaporeans, who outlaid about $1 billion on income-producing property,

Sales of development sites dropped by 49 per cent to $1.2 billion, bringing total deal value to $7 billion, a fall of 26 per cent year on year.

RCA’s managing director Asia Pacific, David Green-Morgan, said the surge of international investment was a positive sign for the Australian commercial real estate market.

“This trend bodes well for the remainder of 2021,” he said.

“It suggests offshore investors have confidence in both the recovery of the Australian economy and the commercial real estate sector.”

Retail, under pressure from lockdown closures and e-commerce, was the surprise outperformer in terms of transaction value during the first quarter, rising 26 per cent year on year to $1.7 billion.

“The pick-up in retail deals is a fillip for the sector,” said Benjamin Martin-Henry, RCA’s head of analytics.

“It shows how investors are being enticed back with softened pricing to the sector, which for so long has been battered by structural headwinds such as e-commerce.”

“Investors remain focused on pockets of strong-performing retail, such as convenience-based retail in inner-city centres and densely populated regional locations supporting neighbourhood shopping centres,” the report noted.

Office investment value was $2.9 billion, marginally up on 2020, with several major transactions closing, including the $800 million purchase of Martin Place Tower South by Manulife and Investa Property Group.

Total Sydney office deals reached $2 billion, followed by Brisbane on $344 million, much of which comprised Ashe Morgan’s $210 million acquisition of 310 Ann Street.

“Perth offices rebounded with $295 million in sales, led by GIC’s purchase of a 25 per stake in the Chevron HQ building for $220 million from Brookfield, which retained a quarter stake.”

Industrial deals were down as the attention of all major players focused on the Blackstone’s Milestone Logistics portfolio, which sold during April to ESR for $3.8 billion.

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