Australia’s commercial property market rose to new heights in 2014, with the industrial market a key driver underpinning the $26.8 billion in property sales that changed hands during the year.
According to CBRE Research, commercial property sales increased 6% in 2014 from the year prior, with $14.5 billion in office property and $7.3 billion in retail assets transacting during the 12 month period. Industrial sales accounted for $5 billion worth of transactions, surpassing the previous record level of $4.9 billion set in 2006 and providing a 55% jump on 2013’s total.
CBRE’s Head of Research for Australia, Stephen McNabb, attributed the strength of the market in 2014 to a flurry of transactions in Q4 and continued growth in the industrial market.
“Industrial sales grew by 55% year-on-year, driven by a number of large portfolio sales,” he said.
“Activity is being prompted by divergence of opinion as to the degree to which yield compression can continue. Strong yield compression in the super prime sector (80-90bp in Sydney/Melbourne) through 2014 prompted selling from some owners, in an environment where new sources of demand are looking for income yield combined with an expectation that the risk of yield softening is low.”
McNabb also said that sustained growth in the office market was also a key factor buoying sales activity in 2014.
“Sydney and Melbourne experienced a strong year of office sales, accounting for 80% of office turnover nationally, compared to 65% in 2013,” he said.
“This is consistent with stronger demand for assets in these core markets in which the vacancy risk over the next few years looks more contained for both prime and secondary assets.”
The CBRE research also revealed that foreign investors continued to maintain a solid presence in the commercial market in 2014, although the growth rate of inflows from offshore slowed to 12%, as expected, following a doubling of foreign investment in 2013.
