Commercial property market picks up as deal-making soars to $6.2bn

Office, retail and industrial deals soared 40 per cent to $6.2bn in the third quarter from a year earlier.

Australia’s commercial property market picked up momentum in the third quarter, as offshore investors, domestic institutions and private capital drove activity.

Real estate agency JLL said office, retail and industrial deals in the period hit $6.2bn, a 40 per cent increase on the figure for the same time last year. The still hot industrial sector topped sales volumes in the quarter at $2.2bn, with offices at $2.1bn and $1.9bn for retail.

Foreign investors are driving the rebound in office transactions and accounted for two of the top three office trades in the third quarter of 2024, including German company Deka’s pending acquisition of 333 George St for $395m and Hong Kong’s PAG buying 367 Collins Street for $315m.

JLL found that industrial continued to perform strongly, with a 66 per cent jump in sales to $8.3bn in the first nine months of 2024 from $5bn for the same period in 2023. Retail recorded a 12 per cent increase in sales to $4.3bn compared to $3.9bn in the same period.

JLL head of capital markets, Australia, Luke Billiau, said there was further evidence of how capital markets were recovering. “Momentum is clearly building across commercial property sectors, and the office sector has been a major beneficiary. As we expected to see at the beginning of 2024, this reflects a higher conviction in the market and greater clarity with pricing,” Mr Billiau said.

“We believe the market is on track to record around $28bn for full year sales volumes, based on the activity in the first nine months and with the fourth quarter traditionally the strongest sales quarter. This would see the full year volumes round out just below the 10-year average of $31bn and signals the market is rebounding.”

Lakeside Joondalup in Perth.

Mr Billiau said the two key catalysts were reaching a peak in the interest rate cycle and finding a floor in the valuation cycle.

“While we’re close to the trough in valuations, the 50 basis point cut by the Federal Reserve is a positive step in the right direction that instils more confidence into real estate investors’ decision-making, and adds to a number of other countries which have also commenced the monetary policy easing cycle.”

Mr Billiau cautioned that Australia was likely to be more delayed than some global markets, with the futures market suggesting around 125 basis points of cuts by the Reserve Bank by February 2026 to 3.1 per cent, although buyers were already moving.

JLL head of capital markets research, Australia, Andrew Quillfeldt said institutions were managing their balance sheets conservatively via sales, reweighting their holdings or using external capital.

“The top five transactions by value this year have been dominated by superannuation fund and offshore buyers. Scale is becoming less of a hurdle, with 12 transactions greater than $300m year-to-date, compared with eight in the same period last year,“ he said.

Big-ticket deals in the quarter were well spread. In industrial, the Austrak Business Park in Melbourne was acquired by Aware Super and Barings from GPT and developer Austrak for $600m.

On the residential front, Han’s Group’s 338 Pitt Street development site in the Sydney CBD was acquired by Billbergia Group for about $500m.