An investor sentiment survey released today by real estate services firm Jones Lang LaSalle shows investor interest in commercial property remains strong in Perth, though Melbourne and Sydney are more popular as investment markets.
An investor sentiment survey released today by real estate services firm Jones Lang LaSalle shows investor interest in commercial property remains strong in Perth, though Melbourne and Sydney are more popular as investment markets.
The full text of a company announcement is pasted below
Investor sentiment has shifted from industrial stock in 2006 overwhelmingly back towards the office sector in 2007, according to Jones Lang LaSalle's annual Survey of Investor Sentiment.
According to Jones Lang LaSalle's National Director Investments, John Williams, nationally investor interest in commercial property remains extremely strong, with 80% of respondents to the survey saying they plan to buy office assets over the next 12 months.
"2007 will be another strong year for most commercial property markets office markets in particular still have some strong growth ahead, he says."
According to Mr Williams "a healthy net balance of respondents 52% (Brisbane) and 50% (Perth) still expect higher returns in these two markets in the short term, while only a small minority (9% in each market) believe that short term returns will fall in Brisbane and Perth following their extraordinary recent strength."
Melbourne and Sydney markets have re-emerged as the most strongly favoured investment markets, overtaking the 2006 preference for Perth and Brisbane assets.
Melbourne and Sydney have moved to the top of the short-term performance table largely because of confidence that returns will not fall over the next six to 12 months," she says. "65% and 64% of respondents believe returns will be higher in Melbourne and Sydney respectively, with negligible expectations of deterioration.
Weaker investor sentiment towards investment in Canberra and Adelaide assets reflect concerns about large new supply pipelines. However, sentiment toward Adelaide assets has improved significantly since the last survey, with a net balance of 36% expecting improved returns compared to 6% 12 months ago.
"Consistent with our findings on cross border capital flows, Australian investors are also showing strong interest in overseas assets. The Investor Sentiment Survey shows that 63% of investors plan to increase their exposure to direct overseas property and 50% to indirect overseas property in 2007" she says.
The survey also reveals that retail property is still considered to be around the peak of the current cycle, though some believe it has moved into the next cycle. Office and industrial markets are considered to be in the late upturn stage of the cycle.
Sentiment towards the various sectors had been mixed. Investors remain very confident about office property in the short and medium term, while in industrial markets, investors remain positive but less than a year ago. However, investors expect lower retail returns over both the short and longer terms
"Nevertheless, given the weight of money and continued strong economic fundamentals, there will continue to be continued strong investment demand for both local and overseas assets in all sectors," she says.
According to Mr John Talbot, Jones Lang LaSalle's Australian Head of Capital Markets, the 2006 commercial property investment market has seen continued strong demand, compression of yields and a strong increase of funds flowing overseas.
"However, some uncertainty is creeping into the 2007 Australian investment market," he says. "Some investors believe that the market is close to fully priced and that it will be hard to sustain the same degree of yield compression going forward. Nonetheless, we anticipate continued strong investment demand for both local and overseas assets."