Perth’s commercial property market in 2013 saw local institutions, syndicators and private investors as the most active players however, according to
Knight Frank, the 12 months ahead will increasingly belong to offshore investors.
Knight Frank believes that while Perth’s commercial property market will continue to perform well in 2014, the dominance of local buyers in the market will diminish as those from offshore markets, particularly Asia, become more aggressive.
In 2013, local buyers accounted for almost 87 per cent of the $1.26 billion of major sales in Perth, while foreign investors accounted for just 13 per cent.
Knight Frank Managing Director of Western Australian, John Corbett believes that figure will change dramatically in 2014 with offshore investors already securing more than $250 million worth of property in January alone.
Mr Corbett said the lion’s share of that was the $205 million that Singaporean company Far East Group paid for Harbour Town, but there had also been other significant purchases by Malaysian, Singaporean and US investors.
“The decrease in the value of the Australian dollar started to draw foreign attention back to Australia in the latter part of 2013, but it will really begin to gain momentum in 2014,” Mr Corbett said.
“In addition to the favourable dollar, yields in Australia are mostly eight per cent plus, whereas in Asia they are below three per cent.
“Investment opportunities in countries like Singapore and Malaysia are going to be limited, but Australia, and particularly Western Australia, look attractive due to the very strong economy.”
Mr Corbett said there would be many good buying opportunities in 2014 and those foreign investors with a good understanding of the local market and ready access to cash or borrowings would be able to pick up quality properties at attractive price levels.
He said that whilst the first stages of offshore interest in late 2013 had focussed on development sites, it would now switch more to income generating assets.
“Domestic institutions, syndicators and private investors were certainly the dominant purchasers during 2013 but this year we will se increased activity from high net worth individuals and institutions from Asia, as well as some ongoing interest from North America,” Mr Corbett said.
“Canadian pension fund PSP bought a 33 per cent share in Raine Square and Bankwest Place last year, while US investor Blackstone purchased 8 St Georges Terrace, showing strong trans-Pacific interest in our market.
“We expect that will be the beginning of increased interest in Australia from US and Canadian markets.” Mr Corbett said offshore investors would look primarily at securely leased CBD office buildings, shopping centres and some hospitality assets.
He said yields for shopping centres would remain tight as they were in strong demand as evidenced by the sale of Harbour Town and the recent sale of Bunbury Forum Shopping Centre for $143 million.