The Urban Developer
AdvertiseEventsWebinars
Urbanity
Awards
Sign In
Membership
Latest
Menu
Location
Sector
Category
Content
Type
Newsletters
Untitled design (8)
2 WEEKS UNTIL OUR UNMISSABLE FLAGSHIP CONFERENCE MORE THAN 550 ALREADY ATTENDING
2 WEEKS UNTIL OUR FLAGSHIP CONFERENCE 550+ ALREADY ATTENDING
REGISTER NOWDETAILS
TheUrbanDeveloper
Follow
About
About Us
Membership
Awards
Events
Webinars
Listings
Resources
Terms & Conditions
Commenting Policy
Privacy Policy
Republishing Guidelines
Editorial Charter
Complaints Handling Policy
Contact
General Enquiries
Advertise
Contribution Enquiry
Project Submission
Membership Enquiry
Newsletter
Stay up to date and with the latest news, projects, deals and features.
Subscribe
ADVERTISEMENT
SHARE
print
Print
OfficeStaff WriterWed 09 Mar 16

Australia's Office Investment Market Charges Ahead

1

Transaction volumes for Australia’s office investment market surpassed the $15 billion mark in 2014 and 2015 highlighting the depth of liquidity in the sector and the demand for core assets, according to new research.
JLL's Annual Office Investment Report revealed that while new sources of capital will enter Australia in 2016, transaction volumes are expected to be lower with activity concentrated in the $50 to $200 million lot size.


JLL’s Head of Office Investments – Australia, Rob Sewell said, “Office investment markets were very active over 2014 and 2015 with high levels of liquidity, multiple capital sources competing for single assets along with multi asset offerings.  New pricing benchmarks were achieved in Sydney and Melbourne with prime office yields nudging down to 5 per cent.

“In 2016, investors will concentrate on acquiring assets with strong income growth potential.

“While we are forecasting above-trend rental growth in Sydney and Melbourne, the performance will be uneven and certain sub-sectors such as A grade will outperform.

“There is a strong argument now with so much growth expected in the A grade sector that these assets should command prices reflecting yields lower than premium.

“Investors have accepted core returns will be lower for longer.  However, they are now being faced with the prospect of a lack of genuine vendors in 2016.  These investors will be forced to pay a further premium to unlock assets.  This may lead to some assets being traded below 5 per cent by a few groups who have very specific mandates.

“There is a resistance by the majority of investors to go below 5 per cent, and with so few opportunities to consider the capital will realise they will have to move quickly to find core style assets in markets such as non-CBD Sydney and Melbourne, as well as Canberra and Adelaide.

“Brisbane saw great activity in 2015 and we expect this to continue in 2016. Perth had increased interest from investors throughout 2015 as a counter-cyclical play and we expect to see transaction activity result this year."JLL’s Head of Strategic Research – Australia, Andrew Ballantyne said “Vacancy movements are more closely linked to fluctuations in supply than to demand and limited development activity from 2017 provides an environment where vacancy will tighten and effective rents will increase.”

JLL projects that area-weighted CBD prime gross effective rents will increase by an average of 4.8 per cent per annum between 2016 and 2019.
[urbanRelatedPost][/urbanRelatedPost]
Mr Ballantyne said, “The effective rent recovery in Sydney and Melbourne provides an additional ingredient to the investment thesis and some core investors will consider opportunities that provide some leasing market exposure to the 2017 to 2018 period."“Furthermore, core+ and value add investors will dedicate greater resources to exploring counter-cyclical opportunities in markets where the leasing fundamentals are more challenging.

“The yield spreads will be compelling for investors that can navigate idiosyncratic risks factors. As an illustration of the opportunity, the spread between average secondary yields in Brisbane and Sydney is 210 basis points – 115 basis points wider than the 10-year average of 95 basis points,” said Mr Ballantyne.

JLL’s Head of International Investments – Australia, Simon Storry said, “The recent volatility in equity markets is reinforcing the defensive characteristics of real estate. Australia is a beneficiary of pension funds adopting a higher allocation to real estate and a higher allocation to Asia Pacific. As a result, new sources of capital will emerge for core assets in 2016.

“Sovereign wealth funds have been active buyers of commercial real estate in global gateway cities. A high proportion of sovereign wealth funds are oil-dependent funds and the correction in crude oil prices will negatively impact fund inflows.

“As a result, we could see less activity from oil-dependent sovereign wealth funds in on-market campaigns in 2016 and 2017.  However, this gap will be taken up by strong demand by Singaporean and European institutions,” said Mr Storry.

 

Officedo not useAustraliaReal EstateSector
AUTHOR
Staff Writer
"TheUrbanDeveloper.com is committed to delivering the latest news, reviews, opinions and insights into the best of urban development from Australia and around the world. "
More articles by this author
ADVERTISEMENT
TOP STORIES
The Port of Brisbane has released its Vision 2060 which details the need for inland rail connectivity
Infrastructure

Brisbane Port’s $15bn Future Faces One Big Obstacle

Renee McKeown
5 Min
Freecity Rouse Hill triple towers 2 Tempus Street
Exclusive

Freecity Takes Covers Off $330m Triple Towers in Sydney’s North-West

Leon Della Bosca
5 Min
Parallel Workshops Stockdale Housing PBSA project
Exclusive

Suburban Success Story Turns PBSA Thinking on its Head

Leon Della Bosca
7 Min
Exclusive

Interstate Developers Find Lots to Love in ‘Progressive, Affordable’ SA

Taryn Paris
5 Min
Bates Smart Richmond Sportslink HERO
Exclusive

BtR Focus Drives Bates Smart’s Richmond Sportslink Concept

Leon Della Bosca
6 Min
View All >
Residential

Home Affordability Gap Widens Across Asia-Pacific

Lindsay Saunders
The Port of Brisbane has released its Vision 2060 which details the need for inland rail connectivity
Infrastructure

Brisbane Port’s $15bn Future Faces One Big Obstacle

Renee McKeown
Logan Wastewater Funding hero
Infrastructure

Flush of Funding to Deliver 20,000 New SEQ Homes

Phil Bartsch
Without the $135.98-million injection it is claimed the Logan City Council would have had to stop approving new housing …
LATEST
Residential

Home Affordability Gap Widens Across Asia-Pacific

Lindsay Saunders
3 Min
The Port of Brisbane has released its Vision 2060 which details the need for inland rail connectivity
Infrastructure

Brisbane Port’s $15bn Future Faces One Big Obstacle

Renee McKeown
5 Min
Logan Wastewater Funding hero
Infrastructure

Flush of Funding to Deliver 20,000 New SEQ Homes

Phil Bartsch
3 Min
Stockland's Triniti HERO
Build-to-Rent

Stockland $400m North Ryde BtR Approved on Appeal

Leon Della Bosca
3 Min
View All >
ADVERTISEMENT
Article originally posted at: https://theurbandeveloper.com/articles/australia-office-investment-market-charges-ahead