Sydney and San Francisco office investment yields lead the world
Globally, Sydney and San Francisco deliver the most attractive office investment yields, and Hong Kong and Tokyo the tightest, according to new research from Savills and Deakin University.
The research also finds that, more generally, commercial property yields continue to offer a very attractive proposition around the world.
“When you look at the yields on offer in core office markets around the world the spread is between 2 per cent and up to 4 per cent. These are very attractive returns in a low-growth, low-inflation investment climate,” said Savills’ national head of Research, Tony Crabb, who coordinated the report, ‘Savills World Office Yield Spectrum’.
Australia’s markets all “looked attractive on a global scale”, according to Crabb, who said Perth and Brisbane yields were higher due to the current commodity price cycle and the effects of the end of the mining investment boom.
” Melbourne and Sydney were tighter due to the low interest rate environment, population growth and expectations of capital appreciation as growing demand forced rents higher and incentives lower,” Crabb said.
Meanwhile, in Asia, Hong Kong and Tokyo “look expensive” while Singapore “looks to provide the best value”.
The report noted that yields in emerging markets were reflective of the risks: Vietnam, Indonesia and the Philippines offered the highest returns; Seoul and Singapore offered core market value.
The report identified strength in Tokyo, saying it “stands out” on a global scale “as a market where inflationary income growth expectations defy the extremely low cost of debt”, adding that “returns in Singapore look particularly attractive in the Asian region”.
“In bond markets 10-year yields closed out the year around 2 per cent in the US, 1.8 per cent in the UK, 0.6 per cent in Germany, 0.35 per cent in Japan and 2.8 per cent in Australia,” Crabb said.
Comparing the market yields of 43 cities across Asia, Europe, the US and Australia, as well as accretion and risk, the report also provides buyer profile and price breakdowns.