Private investors are capitalising on repricing in the office market and dominating commercial office transactions in 2024 to date, as institutional investors largely remain on the sidelines, according to Savills Australia’s latest Spotlight National Office Briefing.
The research reveals that private investors accounted for around half of investment volume in Q1 2024 – around 2.5 times their historical average share.
NSW leads private investor activity amongst the states, representing 61 per cent of office acquisitions in Q1.
Savills says the most significant driver of deal activity in Q1 across the major capitals was the acquisition of secondary office assets for repurposing. 82 Sussex Street, Sydney sold for $29 million to Sugolena with plans for a mixed-use redevelopment. 499-501 Kent Street, Sydney was snapped up by Icon Oceania for $66 million and is set for conversion into a luxury hotel.
“These emerging trends of asset repositioning and countercyclical investment strategies in Australia’s commercial property sector reflect global trends being played out in capital markets around the world,” said Chris Naughtin, National Director – Capital Markets Research at Savills Australia.
Australia’s commercial office market was off to a slow start in Q1 2024 with office investment volumes down 56 per cent compared to a year ago. However, activity is expected to pick up for the remainder of 2024 reflecting ongoing repricing and investors increasing taking a counter-cyclical approach.
In a notable example, Quintessential Equity acquired 1 Margaret Street in Sydney’s CBD, with the 18-storey office tower now expected to undergo a $90 million refurbishment. The building will become fully electrified, with a renewed focus on amenity and sustainability aimed at securing high-quality tenants.
“Pricing will continue to adjust throughout 2024, boosting investor confidence as the year progresses,” said Mr Naughtin.
Private investors accounted for 52 per cent of total investment activity in Q1, with NSW leading the nation with 61 per cent of office sales to private investors.
Significant private acquisitions in Q1 include 124 Walker Street in North Sydney, which sold to Singapore’s Ho Group for $95.5 million as well as the 82 Sussex Street sale to Sugolena for $29 million. In Brisbane, 309 North Quay Street was snapped up by Taiwanese-backed developer Shayher for $46 million.
“At a national level, private buyers accounted for around half of all investment volumes in Q1, reflecting a shift toward higher risk-return investment styles in line with predominant global trends. Institutional investors are generally more cautious and constrained by investment mandates, and often more leveraged,” said Mr Naughtin.