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11/08/2021 - 09:00

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More than $951 million worth of Perth office assets have transacted so far in 2021, trending close to pre-pandemic volumes, according to the latest report from CBRE.

As of June 2021, Perth prime office market yields were 6.27 per cent. Photo: David Henry

More than $951 million worth of Perth office assets have transacted so far in 2021, trending close to pre-pandemic volumes, according to the latest report from CBRE.

CBRE’s Perth office report notes how Perth’s relative economic stability and improving leasing market during COVID-19 has put it in good stead with investors, making it one of the most attractive markets to invest over the past 18 months.

The report found that approximately $951 million worth of Perth office stock had changed hands for the 2021 calendar year, significantly up from the $276 million worth of sales last year and nearing the five-year high of $1.2 billion in 2019.

Recent office deals include Dexus’ move to acquire a 49 per cent equity stake in Capital Square Tower 1 and Primewest and BlackRock Real Asset’s joint-venture play for 140 St Georges Terrace.

CBRE Western Australia head of capital markets Aaron Desange said despite elongated transaction processes and Australia-wide lockdowns suppressing and delaying activity, appetite for Perth investment opportunities had continued to rebound to relatively buoyant levels.

“Given the current economic fundamentals at play, investors have taken notice of the Perth market and future long-term growth potential, proven by the level of engagement in recent sales campaigns,” Mr Desange said.  

The CBRE report estimates that about $5.1 billion worth of capital has been actively vying for office assets in Perth since June 2020, which it expects will continue to underpin demand for the asset class for the remainder of the year.

“While capital is out there, it is still selective in nature, with income certainty of the highest importance given investment predictability and more favourable funding terms,” Mr Desange said.

Prime office yields had continued to compress significantly on the east coast, dropping below 6 per cent.

Meanwhile, yields for prime office assets across the Perth market had hovered above 6 per cent.

As of June 2021, Perth prime office market yields were 6.27 per cent, compared to 4.59 per cent for Sydney and 4.74 per cent for Melbourne.  

CBRE capital markets associate Nicholas Volk said a healthy yield premium remained for groups willing to invest in similar assets in different geographies, with a current spread of 168 basis points between Perth and Sydney compared to the 30-year average of 99 basis points.

Given an attractive yield premium for prime Perth office assets, he said, along with unsatisfied capital, demand was expected to rise.

An improving leasing market was also attracting investors to Perth.

Amid minimal lockdowns, the state has added 122,250 jobs to the economy since May 2020, CBRE data found.

This translated to office demand, with over 45 Perth leasing deals conducted this year representing approximately 59,350 square metres in gross volume - almost double the amount of space leased in 2020 (31,500sqm).

“Favourable physical office occupancy levels have allowed business’ real estate strategies to be formulated more effectively which has translated into new enquiry and new leasing deals,” Mr Volk said.

“Investors have placed value on assets which have proven successful in attracting tenants and in generating leasing momentum given they are able to underwrite their acquisitions with conviction and confidently deploy capital.”

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