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News release

AUSTRALIA

Australian commercial property volumes in 2015 are trending below record 2014 levels


JLL's preliminary figures for investment volumes for the first half of 2015 show Australian commercial property volumes continue to track lower than last year's record levels.

The figures show commercial property markets recorded $9.9 billion of sales (above $5m) across the office, retail and industrial sectors during the first six months of 2015. This figure is below the $13.4 billion of sales recorded in the first half of 2014. 

JLL's Head of Office Investments – Australia, Rob Sewell said JLL had forecast early in the year that investment volumes for the office sector would be lower in 2015 after a record year for commercial property transaction volumes in 2014. A record $30 billion of office, retail and industrial transactions were recorded in 2014.

Mr Sewell said, "However, lower transaction volumes this year are not a symptom of reduced interest – investor demand across a range of buyer cohorts remains robust. We expect that overall transaction volumes will recover in the second half of the year. A number of large transactions are in the pipeline, including the sale of the Investa Property Group platform and the sale of GIC's Australian logistics portfolio at an estimated value of more than $1 billion.

"Overseas investors, particularly from within Asia Pacific, have been drawn to the market by the weaker Australian dollar, attractive yields, high transparency and sound governance. We expect these key drivers to support overseas investment into Australian commercial property for the remainder of 2015 and into 2016.

"Offshore capital has been more engaged and aggressive in 2015 and is much broader, covering all areas of the risk spectrum.  Clearly some of these groups are getting concerned about a lack of formal opportunities this year, while greater competition means investors will have to become more aggressive in pricing assets.

"JLL was involved in several major office sales in the second quarter – Waterfront Place and Eagle Street Pier in Brisbane transacting for $635 million, 320 Pitt Street in Sydney for $200 million and K1, 1 King Street, Fortitude Valley in Brisbane.

"The reduction in transaction volumes in 2015 highlights that a number of large assets traded in 2014 and there are fewer fund-through opportunities.  Furthermore, a number of closed end funds have disposed of their assets. In the second half of 2015, we are likely to see more secondary stock traded.

"More activity in Brisbane and Perth will also eventuate as both markets move through a recovery phase.

"A recovery in the physical markets in Sydney and Melbourne provides an additional opportunity to the investment thesis. With physical markets tightening, particularly in the A Grade market, market rental growth is starting to surpass general market expectations.  Sydney and Melbourne are being viewed more than just a safe haven – they are markets that now offer genuine growth opportunities," concluded Mr Sewell.