14/12/2018 - 14:00

Offshore buyers, institutions drive office sales near $1bn

14/12/2018 - 14:00

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Australian institutional investors and offshore property powerhouses sharpened their focus on potential upside in Perth’s office market in 2018, as the total value of transactions approached $1 billion.

Offshore buyers, institutions drive office sales near $1bn
Investors see relative value in Perth assets as compared to Sydney or Melbourne. Photo: Attila Csazar

Australian institutional investors and offshore property powerhouses sharpened their focus on potential upside in Perth’s office market in 2018, as the total value of transactions approached $1 billion.

Singaporean property investment group GIC Real Estate, which has a portfolio worth more than $US100 billion worldwide, punctuated the active 2018 with its recently-completed $326 million acquisition of the 40-level Exchange Tower, driving total office sales up to $896 million.

While both Primewest and AMP Capital achieved a premium for their 50 per cent shares in the asset, the deal was an illustration of the upside present in Perth commercial assets, as the sale was done at well below the potential replacement cost for the 34,401sqm tower.

Other major transactions in 2018 included ASX-listed Elanor Investors acquiring cbd fringe office asset WorkZone West for $102.5 million, China-backed Zone Q Investments picking up two St Georges Terrace Towers for $65.3 million, and Growthpoint Properties Australia’s $102.5 million purchase of 836 Wellington Street.

Office owners capitalised on momentum that began gathering steam in the second half of 2017, with all of that year’s $582 million in commercial transactions occurring post-June.

JLL managing director John Williams said it was clear large offshore and institutional property investors saw upside potential in Perth.

“Most of the investors see upside in Perth because of where our cycle is and how business is gradually expanding in Western Australia,” Mr Williams told Business News.

“They also see Perth, and Brisbane by the way, as being relative value compared to Sydney or Melbourne.”

Mr Williams said sales campaigns throughout the year for premium and A-grade office buildings, where the vacancy rate in Perth is around 4.1 per cent, were hotly contested.

“Everything that we’ve had out there in the marketplace has been competed for by the investment community,” Mr Williams said.

“At 226 Adelaide Terrace, we had four bidders going at it and three rounds of bidding.

“If you’ve got the product, the buyers are there. The question will be in 2019, what is actually going to be available for sale?”

Savills Perth associate director of capital transactions, Nick Charlton, said prime yields for office sales in 2018 were sitting on par with pre-global financial crisis levels.

He said he expected an increase in transaction volume in 2019, with counter-cyclical investors eyeing Perth particularly interested in assets worth more than $200 million.

“In previous cycles, it has typically been difficult to trade assets in this segment of the market,” Mr Charlton said.

“The depth of bidding on the Exchange Tower exemplifies the popularity of premium and high-quality A-grade assets being experienced in 2018 among these investor groups.”

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