DTZ research shows that half of all commercial property transactions in Australia in the fourth quarter of 2010 occurred in Victoria, which recorded a $2.2 billion in total purchases across the office, retail and industrial sectors. By comparison, Victoria recorded $1.3 billion in transactions in 2009.
During the quarter Queensland and New South Wales each comprised 15% of total market transactions, totalling $1.3 billion, followed by the Northern Territory at 7%, $300 million.
Despite the 11% decline in overall transactional activity in Australia in the last three months of 2010, the $4.5 billion in transactions achieved during the quarter was 66% higher than in the same period of 2009.
Overall, the result for Australia’s commercial property market in 2010 was 74% stronger than in 2009, with $16.6 billion in transactions recorded nationally, the latest report from DTZ shows.
According to the report the small decline recorded in the fourth quarter of 2010 is largely due to the previous quarter’s figures being heavily inflated by Brookfield Properties’ $1.6 billion investment in 16 office assets. Excluding this deal, transactional activity actually improved by over $1 billion, or 30%.
The office sector was the most popular investment class. However the biggest individual deals in the quarter were in the retail and leisure sectors, specifically the sale of the DFO Portfolio ($498 million), Westfield Doncaster ($350 million) and Ayers Rock Resort ($300 million).
Listed vehicles were strong acquirers of Australian commercial property during the past two quarters of 2010, investing approximately $2.745 billion. This reverses the trend seen in 2008, 2009 and the first half of 2010, when listed groups divested almost $6.5 billion of commercial property.
Conversely, private vehicles have demonstrated opposing tendencies by being net sellers over the past two quarters, divesting $4.6 billion of commercial property in 2010, said David Green Morgan, head of Asia-Pacific research at DTZ.
‘As we enter 2011, there is widespread belief in the sector that the commercial property investment market is now fully recovered and is one of the most sought after in Asia Pacific.
Foreign buyers are still very keen on Australia, encouraged by the economic fundamentals and on-going demand from Asia for Australian exports,’ he said.
‘Based on DTZ’s global research, Australia’s prime office and retail assets are the sectors investors will remain most interested in during the year ahead. It is very likely that Melbourne, and Victoria in general, will remain the favoured investment location throughout 2011. Now strongly cemented as Australia’s best performing office market, investors are keen to access Melbourne’s tight future supply, which along with a falling vacancy rate, will continue to push rents and values upwards,’ he explained.
‘Both Queensland and Western Australia are also likely to experience increased investment activity, as long as there is sufficient stock on the market,’ he added.
But he pointed out that the recent flood devastation in south east Queensland and the Brisbane CBD may impact the extent to which this growth occurs, however, as yet this is still too early to determine.
Melbourne was also rated the top performer in the prime industrial market in 2010 and, based on DTZ forecasting, is predicting total returns of 11% per annum, incorporating capital and rental growth, between 2011and 2015.
