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News release


Commercial office sales for the first three months of 2010 have already reached nearly a half of total sales for 2009

National commercial property sales for office, retail and industrial combined is $3.5 billion already this year

SYDNEY, 7 APRIL 2010 – Commercial property sales in Australia’s office sector this year are already approaching the half-way mark of the total sales figure of $3.699 billion recorded for the whole of 2009.
Australian Head of Capital Markets for Jones Lang LaSalle, John Talbot said the announcement of the sale of HQ South in Fortitude Valley , Brisbane to a Swiss pension fund has lifted the number of office transactions to 20 so far this year, totalling  $1.5 billion.  This includes the sale of Aurora Place, Sydney to the National Pension Scheme of Korea for A$685m which was settled this month.
“This is a strong start to 2010 – already we have reached more than 40% of the office sales volume recorded for the whole of last year.   Confidence is clearly returning to the property investment market, across all asset classes but most notably in the Office sector.
“While we don’t expect 2010 will reach the record level of office sales of $7.632 billion that we saw in 2007, we do see the strong start to sales volumes this year as a barometer for transaction activity in 2010.
“Jones Lang LaSalle currently has $1 billion of office property being marketed for sale.  We have strong interest on these properties and if they sell in the first half of this year, then I think we can definitively say that the office market is well on the way to recovery,” Mr Talbot said.
National Retail Investment sales for the quarter have been equally strong, with $1.9 billion of retail sales (above $10 million) transacted in Q1.  This already equates to about 90% of the total retail sales volume for 2009.
Jones Lang LaSalle Retail Investments currently has over $3 billion of retail property being marketed nationally, including the national Direct Factory Outlet portfolio and Top Ryde City in NSW.
Mr Talbot said sales volumes during the worst of the Global Financial Crisis in 2008 and 2009 were down across the board by about 50% over the previous boom years of 2005-07.  He cited the main reasons for this dramatic falling away of property transactions as significant investor uncertainty as asset pricing started to rapidly deteriorate, equity and debt markets were in freefall, there was a massive disconnect between buyer and seller expectations and ultimately the markets chose an equity recapitalisation path over an asset sale path as a more palatable road to salvation.
Jones Lang LaSalle sales campaigns in late 2009 showed the first signs of the large A-REITs and Wholesale trusts re-entering the investment market to compete for rarely traded prime assets.
Mr Talbot said most analysts estimate that the A-REITs have raised excess capital relative to optimal gearing. 
“Acquisitions will be a key strategy for larger AREITs that are now focused on growing portfolios to boost dividends to shareholders.  Nevertheless, the extent of the debt refinancing task over the next few years ensure that smaller A-REITs will continue to be active vendors and look to dispose of non-core assets.”
Mr Talbot said as the fog of negativity started to lift in late 2009, coming into 2010 the whole environment around investor sentiment and attitude has changed. 
“Investors I speak to regularly all now want to be back in the market as buyers.  Very few are active sellers unless there are specific reasons to sell. 
“We now have a long list of active buyers across most markets and investor types range from domestic institutional core and value add funds, private groups and a significant pool of offshore groups attracted to the transparency of the Australian market and the strong underlying performance of our economy.
“Like any market impacted by supply and demand factors, underlying asset prices have stabilised and in some instances have started to improve as an increasing number of buyers compete for a relatively finite supply of opportunities. 
"Recent market activity would suggest that competitive tensioning is starting to come back into play for the first time in a while and vendors are increasingly pleased with the results they are achieving.
“Increased competition for assets, risk premiums above historical benchmarks, the stabilisation of debt markets and the prospect of strong medium-term rental growth could lead to yield compression by late 2010. 
“With greater depth to the buyer pool, combined with improving confidence in the market and greater clarity around pricing dynamics is established through more dealflow, the total and average value of transactions is predicted to increase over the next 12 months,” Mr Talbot said.