Foreign investment to fuel commercial property marketDespite a subdued first quarter for Australian commercial property sales, research from CBRE shows office sales have been the strongest, and greater activity is predicted for Q2, with foreign investment a major contributor.Sales data on Q1 from CBRE reveals sales of retail, industrial and office property totalled $3.1 billion (down from last year’s $5 billion-plus) – the lowest Q1 outcome since 2011.However, CBRE’s Australian head of research, Stephen McNabb, attributes the results to “several key factors, including a paring back from a record level of transaction activity in 2014″.”We have also seen yield compression sharply concentrated within prime and premium assets, but as yet little compelling reason for owners to sell these assets,” McNabb said.”However, we are at a point where we expect some domestic investors to look to trade out along the risk curve, seeking value-add opportunities, which would drive higher turnover through the remainder of 2015.”Office asset transactions totalled an estimated $2.2 billion, giving it stronger activity than retail and industrial, which delivered more subdued results, with sales down 49 per cent in industrial and 60 per cent in retail.Office sales are predicted to continue to grow, according to CBRE’s regional director of Capital Markets, Josh Cullen, who anticipates 2015 transaction activity to surpass the high of 2014.”The Q1 result was primarily due to a lack of available stock and we’re certainly continuing to see extremely strong demand from both domestic and international investors,” Cullen said.Meanwhile, CBRE’s regional director of Industrial & Logistics Services, Matt Haddon, said industrial’s lull in Q1 is “the calm before the storm”. He added that increased activity from foreign investors “would help fuel the market”, citing the entrance of five new global players in the Australian industrial and logistics market since late 2014: KWAP, Invesco, M&G, W.P. Carey and Cache (ARA).”We’re currently aware of around $10 billion in buyer requirements for Australian industrial assets and of approximately $4 billion in stock that vendors currently intend to bring to the market in 2015,” Haddon said.”This gives us confidence to predict that last year’s record of $5 billion in industrial turnover will comfortably be exceeded in 2015, given that more decisions to sell will undoubtedly be made in the forthcoming round of midyear portfolio reviews.”According to CBRE’s data, offshore buyers accounted for 45 per cent of all commercial purchases in Australia in Q1; that is, $1.45 billion in deals, an increase of 52 per cent year-on-year.
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