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Commercial real estate transactions fall 10%

The CBRE has reported that the total amount of commercial real estate transactions fell by nearly 10 per cent in 2018, the lowest levels recorded since 2013.

The commercial real estate services company released its latest commercial sales data highlighting a five-year low in the value of commercial real estate transactions conducted in Australia in 2018.

The report confirmed that a total of $32.8 billion changed hands in the last 12 months – 9 per cent down on the $36 billion recorded in 2017.

The report reads: “With a large volume of institutional grade stock transacting over the past four years, we expect investment volumes in 2019 are likely to remain subdued by comparison, with diminishing availability of stock, tighter credit controls and firm asset pricing expected to hamper transaction activity.”

Of all recorded commercial transactions in 2018, offshore buyer activity accounted for approximately 28 per cent, down on the five-year average of 31 per cent.

Meanwhile, the average deal size for offshore investors and domestic investors was recorded at $74 million and $34 million respectively.

According to CBRE, there was a languid level of Chinese investment over the last 12 months, while buyers from Hong Kong were significantly more active, recording a 200 per cent increase in capital deployment into Australia.

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Offshore capital continued favouring institutional grade stock, with the majority coming from the USA ($2.3 billion), Singapore ($1.9 billion) and Hong Kong ($1.7 billion).

The CBRE also noted: “After declines in 2017, the Americas and EMEA regions increased their capital deployment [by] 9 per cent and 34 per cent, respectively.

The preferred destination for capital investment was Sydney at $12.5 billion, followed by Melbourne at $8.5 billion, Brisbane at $5.4 billion and Perth at $2.2 billion.

“Whilst offshore investment volumes in Melbourne reached just $1.5 billion – the lowest level in six years – overall volumes were up 12 per cent, driven predominantly by a 50 per cent increase in retail investment,” the report reads.

Perth reappeared on the investment radar, with overall investment activity growing 6 per cent – the highest level of transactions since 2013.

This performance was chiefly propelled by a 51 per cent increase in office transactions to over $1 billion for the first time since 2013. At long last, offshore investors returned to Perth in 2018, “doubling 2017’s total and accounting for 38 per cent of overall volumes” in Australia.

The CBRE concluded: “In comparison to 2017, Sydney and Brisbane experienced declines of 17 per cent and 14 per cent respectively. In Sydney, this was predominately driven by a 23 per cent decline in office investment volumes, whilst for Brisbane, it was a 37 per cent fall in retail transactions.

There were some high-profile entity acquisitions in 2018 (IOF, Propertylink) and given the challenges faced by investors in trying to find quality purchasable stock, conditions are ripe for further takeover activity,” it added.

[Related: APRA flags commercial lending risks]


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