22/01/2018 - 15:54

Investors move on Perth seeking value

22/01/2018 - 15:54

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Foreign investors are making their mark on Perth, accounting for more than half of the purchases in the CBD office market in the past two years, according to Savills Australia.

Investors move on  Perth seeking value
The sale of Westralia Square for just more than $216 million to GDI property was the largest office market transaction recorded for 2017. Photo: Attila Csaszar

Foreign investors are making their mark on Perth, accounting for more than half of the purchases in the CBD office market in the past two years, according to Savills Australia.

The group’s latest ‘Quarter Time National Office’ report has revealed that about $700 million worth of transactions were recorded during 2017 – up from $691 million in 2016 and $247 million in 2015.

Transactions for 2017 were also above the 10-year average of $614 million, with Savills’ research showing foreign investment accounted for 55 per cent of major Perth office acquisitions during 2016 and 2017. 

Sydney-based GDI Property’s purchase of Westralia Square for $216 million was the largest acquisition recorded in the past 12 months, followed by the sale of The Quadrant facing Elizabeth Quay for $175 million to a Primewest Trust, backed by offshore equity including Singapore-based investment fund GIC Private.

Other foreign investors making a move for Perth assets last year included Singaporean groups Far East Organisation, which struck a near-$72 million deal for 109 St Georges Terrace, and The Straits Trading Company, following its announcement in December detailing the acquisition of 45 St Georges Terrace for $57 million.

Savills associate director for research and consultancy, Katy Dean, said although the past 12 months had been characterised by a lower volume of transactional activity compared with 2016, several large-scale institutional-grade assets had been brought to market.

“The significant price difference between Perth and the tightly held markets on the eastern seaboard not only represents various levels of opportunity for investors, but provides some extra buffering relative to the cost of borrowing,” Ms Dean said.

Savills Perth managing director Graham Postma said the Perth CBD offered far greater value for investors than its counterparts on the east coast.

“The value gap in terms of capital values per square metre for A-grade office has never been greater, with Sydney now more than $10,000 per square metre more expensive than Perth,” he said.

“Perth is now well placed to offer significant growth for investors in the coming years.”

Mr Postma said the market yield spread between Perth and the eastern seaboard CBDs was the widest it had been in more than a decade, with the market yield spread increasing to around 250 basis points between Perth and Sydney and 210 between Perth and Melbourne.

“The real risk in Perth relates to the strength of the office leasing market and the level of confidence that the market has bottomed and begun to recover,” he said.

“Effective rents are expected to start to recover, starting at the top end and flowing through to the lower-grade stock over time.”

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