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Oz commercial property market soars after disaster struck first quarter

About A$2.7 billion of commercial property changed hands in the three months to June 30, according to preliminary research from real estate advisors CB Richard Ellis.
The 2010/11 financial year saw transactions reach $8.9 billion, a year on year increase of 32%. While the second quarter tally was a 432% increase on the first three months of the year, and double the sales recorded for the June quarter last year of $1.27 billion. It was 14% above the long term quarterly average turnover.

It is welcome news for the market as the $638 million of office, industrial and retail sales in the first quarter of this year was the lowest quarterly turnover for almost 20 years, CBRE said.

Office sales accounted for 52% of transactions, followed by retail sales at 40%. Two of the bigger transactions were the sale of a 50% share in Northland Shopping Centre to the CPP Investment Board of Canada for $455 million and the sale of part of the Woolworths portfolio for $266 million.

‘The office market is fundamentally in good shape and improving. Floods and cyclones in Queensland, the Japanese and New Zealand earthquakes and general global uncertainty all conspired to create a very slow start to the investment year,’ said CBRE executive director, global research and consulting, Kevin Stanley.

The research also shows that foreign investors accounted for 37% of all property transactions in the second quarter with the major purchase being the Northland Shopping Centre. Asian investors remained interested and active in Australia during the quarter, with 7% of all transactions attributed to purchases emanating from Singapore and involving newcomers to the market such as Pramerica and CIMB and long time Australian investor GIC.

European investors were also active, with the $170 million sale of the new Australian Taxation Office project in Brisbane to Credit Suisse Asset Management and the purchase by Swiss private interests of 10 Bridge Street in Sydney for about $60 million. The report points out that the strong Australian dollar is not a deterrent for foreign investors.

Despite industrial sales accounting for only 8% of turnover in the second, Stanley believed that stock availability was an issue, but the sector continued to attract strong interest from buyers from within and outside Australia. Institutional investors continued to be a driver, with property foreign and domestic fund managers accounting for 25% of all acquisitions.

Real estate group DTZ also released quarterly sales figures yesterday. Its Investment Market Update report for the second quarter analysed commercial transactions of $5 million or above, a lower sales hurdle than CBRE.

DTZ found sales had fallen between the first and second quarters, recording $3.5 billion of transactions in the June quarter, down from $5.2 billion in the first three months of the year.