Offshore investors are now looking to invest in shopping centres. Picture: Getty Images
Commercial property developers and landlords are stepping up activity as confidence flows into the sector in the wake of advances on a coronavirus vaccine.
The potential roll out of a COVID vaccine earlier than expected in 2021 has bolstered hard hit areas of property, particularly large shopping centres and office skyscrapers.
Major shopping centres have been in free fall for months and will remain under pressure as retailers have switched permanently to boost their online businesses.
But property players said that offshore investors were now willing to invest in the sector as a path out of the coronavirus crisis was clearing.
Office towers have been battered by fears of low occupancy and higher vacancy, feeding through to lower rents and higher incentives, which could have slashed values.
However, fears of a broadbased market fall have dissipated even though CBD office markets are being hit by higher vacancy levels.
Shopping centre trusts also locked in gains they made on Tuesday and stocks that initially lagged, including industrial property company Goodman Group and funds manager Charter Hall, recovered.
“Rising confidence will combine with very low interest rates to drive investor capital toward property, and particularly commercial property yielding two to three times the yield available from buying residential,” Charter Hall chief executive David Harrison said.
The company is putting its deal-making prowess on display and has struck up an $800m industrial partnership with Dutch pension fund manager PGGM as offshore money chases local commercial assets.
The company has already secured about $300m worth of industrial and logistics assets in Sydney and Melbourne and is chasing a further $500m for the new partnership in a sign the area will remain strong even as other areas of property bounce back.
Charter Hall also said it would purchase a $103m office and warehouse complex in Adelaide for its listed social infrastructure fund. Both moves come ahead of its annual meeting and some analysts have tipped an earnings upgrade.
Dexus CEO Darren Steinberg said the news about the COVID vaccine trials had spurred confidence as it appeared more likely that a vaccine would become available sooner than expected.
Mr Steinberg said more people in capital cities outside Victoria were returning to work in offices.
He predicted the rising amount of sublease space may be reduced as companies reassessed their occupancy requirements.
“Hopefully we will see a more normalised investment environment which will also be stimulated by very low interest rates across the globe,” he said.
Colliers International managing director, capital markets, John Marasco, said the firm was “cautiously optimistic” that confidence would return to the market, “not only from an investment view point but also for occupation” as workers returned to offices.
CBRE senior managing director, capital markets, Pacific, Mark Coster predicted the return to CBDs, offices and retail spaces would likely be fast tracked, but he expected the e-commerce boom to be lasting.
“We expect the performance of Australian property markets to mimic those of the US, to an extent. There is still tremendous upside for industrial and logistics assets, given Australia doesn’t have the same proliferation of fully developed e-tailing as in the US,” he said.
The firm is forecasting increasing international capital flowing into Australia despite ongoing travel restrictions. “There’s a bank of investor dollars waiting on the sideline to be deployed, we’re seeing the overwhelming majority of transactions receiving multiple bids so with limited supply in 2020, demand is outstripping stock levels,” Mr Coster said.
