Perth’s CBD office market recorded $740 million worth of major transactions in the 12 months to March 2018, more than three times higher than it was this time last year, according to research undertaken by Savills Australia.
Perth’s CBD office market recorded $740 million worth of major transactions in the 12 months to March 2018, more than three times higher than it was this time last year, according to research undertaken by Savills Australia.
The latest Savills Office Quarter Time report found $740 million worth of major office transactions (more than $5 million) in Perth took place in the year to March 2018, with $108 million transacted since January.
Savills associate director for Research & Consultancy Katy Dean said the increase in investment volumes on a year-on-year basis was indicative of the cyclical trend unfolding in Perth.
“There were early signs in 2016 that the market was close to bottoming out – office vacancy was reaching its peak and the divergence between prime and secondary space was increasing,” she said.
“Iron ore prices began to rally and bond yields were at record lows, and there was also a great deal of uncertainty in the political environment, particularly in the US and Europe.
“At this time, yields were compressing as the global hunt for yield intensified – a trend we saw nationally – and the buyer profile was predominantly institutional-based.”
Ms Dean said that foreign investors accounted for 63 per cent of buying activity in the 12 months to March 2018 - the highset proportion in the past five years.
Foreign investors accounted for the total $108 million transacted between January and February; Chinese property developer and investor Zone Q purchased two properties earlier this year at 55 and 182 St Georges Terrace for $43.5 million and $21.1 million respectively; and Singapore-listed OKP Holdings made its first foray into the Australian market with its $43.5 million acquisition of 6-8 Bennett Street from the estate of the late Len Buckeridge in February.
Ms Dean said when looking at the average sale price in Perth, institutions were purchasing assets at about the $110million-plus mark on average, and foreign investors were entering the market at about $60million-plus.
“To some extent, the lower price point (of recent transactions) is indicative of the value-add or opportunistic strategies being employed by foreign investors,” she said.
The report also found that in the year to March 2018 institutional investors accounted for 50 per cent of the assets sold in the Perth CBD (assets more than $5million), while foreign investors only accounted for eight per cent of activity as vendors.
Savills Perth managing director Graham Postma said Foreign investors accounted for 50 per cent of office investment activity (for more than $5million) by value in the Perth CBD office market during the past three years to March 2018.
“The economy has rebounded, job numbers are up and both consumer and business confidence has improved,” he said.
“Tenant appetite for prime space is elevated and incentives have started to retract, returning net effective rental growth for the first time in five years.
“We may see more investors move up the risk curve to seek out value-add and opportunistic buys and take advantage of the shift in the cycle.”
