The value of commercial real estate transactions in Australia crashed 58 per cent over the first nine months of the year to just under $11 billion as vendors and purchasers paused their divestment and investment decisions amid the chaos wreaked by COVID-19.
Figures compiled by Colliers International show office deals plummeted 75 per cent to just $4.3 billion, retail deals shrunk 29 per cent to $2.7 billion and just $400 million of hotel changed hands, most of them pre-COVID.
The only bright spot was the industrial property sector, which has benefited in Australia and globally from a surge in e-commerce-driven warehouse space demand as more people have shopped online during lockdowns.
Colliers International recorded $3.57 billion of industrial transactions in the first nine months of 2020 up 5.6 per cent year-on-year.
This figure would have been substantially higher were there more prime assets for sale – the real estate firm estimates that about $26 billion in mostly institutional capital is looking to invest in the sector.
“Given that just $3.57 billion has traded so far in 2020, it highlights the significant mismatch between supply and demand and the significant volume of unsatisfied capital looking to be placed,” said Gavin Bishop, head of industrial capital markets at Colliers International.
“As a result of this, we expect that additional assets will be brought to market in 2021 as groups look to capitalise on the continued strength of the industrial and logistics market,” he said.
A separate report by Cushman & Wakefield noted that for the first time in almost a decade, quarterly industrial deal volumes outpaced office investments in the September quarter.
The real estate firm recorded $2.24 billion of industrial transactions in the three months to September, while quarterly investment into the Australian office market totalled $2.12 billion.
The last time this occurred was in the first quarter of 2011.
Significant industrial transactions during the September quarter included Dexus’ sale of six assets into its joint venture vehicle with GIC for $270 million, and Charter Hall purchasing the OIA Glass portfolio for $214.6 million.
Cushman & Wakefield’s NSW managing director of commercial real estate, Simon Fenn, said he expected office sales volumes to increase in the final quarter of the year and to be higher again in the first half of 2021 – provided the COVID-19 virus is contained,
“Many owners now better understand the depth and quality of the buyer demand, where the capital is coming from and how it is pricing assets, and so are increasingly confident about deciding which assets to sell,” he said.
Collier International’s head of office capital markets Adam Woodward was also optimistic about the outlook, noting that the firm had been appointed to sell over $2 billion of office assets.
In the retail sector, investment activity has been sustained by transactions of well-located neighbourhood centres, a trend Colliers International expects to continue through to the end of the year.
In the COVID-ravaged hotel sector, deals are expected to total just $600 million by year-end – the lowest annual transaction volume since 1999.
“The global hotel and tourism sectors have been one of the most impacted by social distancing measures introduced by governments across the world in response to COVID-19, with impacts widespread and indiscriminate across borders, cities and visitor segments,” said Gus Moors, head of hotels at Colliers International.