Commercial property investment close to record pace
Investment in commercial assets is running close to a record pace after some $15 billion of deals in the first half of the year.
Office assets are in strong demand but foreign investment is falling, according to research from Cushman & Wakefield that also quantifies the Alter family’s blockbuster sale of half-stakes in two shopping centres to QIC.
The 50% interest in Pacific Werribee changed hands for $611.5 million on a yield of about 4 per cent.
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Half of Pacific Epping traded for $372.5 million on a yield of about 4.75%.
This means the Alter family’s Pacific Group of Companies reaped $984 million.
Even as yields have been tightening for office and retail properties, investors are looking for opportunities with better returns than cash or bonds.
“The outlook for the second half of the year remains positive. A range of assets totalling over $1bn are in late stages of due diligence, which should provide a solid start to the third quarter,” Cushman & Wakefield say.
After a relatively quiet start to the year, activity in the second quarter picked up substantially, proving that there is still considerable appetite for real estate assets in Australia
“Government bond yields have recently tightened. This has helped maintain commercial real estate’s relative value proposition and so is supportive of further investment activity.”
A total of $8.6 billion was invested during the second quarter, taking the first half spend to $15 billion.
Foreign investors made up nearly a quarter of total spend during the second quarter, but foreign investment over the first half dropped to $4.4 billion from $6.2 billion in the first half of 2017.
More than half the deal volume was in the office sector, where the largest deal was super fund REST’s purchase of a 33% stake in AMP Capital’s Quay Quarter Tower.
Real estate agency CBRE says that the first half of the year had allayed fears that a dramatic decline in buyer activity was on the cards and forecasts that the market is set for a more subdued phase had been disproved.
“After a relatively quiet start to the year, activity in the second quarter picked up substantially, proving that there is still considerable appetite for real estate assets in Australia,” CBRE associate director Ben Martin-Henry says.
He cautions that Chinese capital controls are having a meaningful impact globally.
“If these restrictions continue we expect Chinese investment into Australia to record its lowest year since 2012,” he adds.
This article originally appeared on www.theaustralian.com.au/property.
