Commercial property sales boomed through 2021, with big investors chasing security and yield setting a new benchmark of $71 billion in transactions – well ahead of the previous 2019 high of $64.5 billion, according to data compiled by Real Capital Analytics.
The record total was propelled by pent-up demand after a lacklustre 2020 – when just $42 billion in commercial properties traded (the lowest since 2013) – and an unprecedented number of portfolio deals, headlined by the $3.8 billion acquisition of Milestone Logistics by GIC and ESR.
Industrial and logistics was by far the hottest sector as investors bought heavily into its e-commerce fuelled growth story, spending $28 billion and pushing average yields well below 5 per cent.
The office sector surprised on the upside, given the pressure on traditional workplaces exerted by COVID-19, recording $22 billion in deals, with foreign buyers prominent on the biggest transactions.
British investor M&G Real Estate teamed up with Mirvac to acquire half of Sydney’s EY Centre for $575 million and US-based Blackstone paid $925 million for 50 per cent of Grosvenor Place in the same city.
Retail also outperformed and had a strong finish to the year, with volume in the fourth quarter rising to $5.8 billion. This was largely thanks to the complex $2.2 billion deal in which UniSuper and Cbus Property partnered with AMP Capital to take majority ownership of Pacific Fair on the Gold Coast and a half stake in Sydney’s Macquarie Centre.
It was Australia’s biggest-ever direct retail property transaction, demonstrating the increasing influence of super funds on commercial property, lifting the total value of retail transactions to $17.2 billion, 11 per cent above the five-year average.
Benjamin Henry-Martin, RCA’s local head of real estate research, said there was an element of catch-up in 2021’s sales surge.
“There’s a combination of factors, but you can certainly see there has been a strong bounce back from 2020 when there was a lot of uncertainty and investment decisions were put on hold,” Mr Martin-Henry said.
“Those investment decisions appear to have been acted on in 2021, which is why we’ve had such a strong year.”
In terms of investment locations, Sydney attracted by far the most capital.
The Sydney office market topped sales at $8.7 billion, followed by Sydney industrial with $8.2 billion. Then came Melbourne industrial at $7.4 billion, Melbourne office at $4.7 billion, and Sydney retail at $4.6 billion.
Foreign investors were active despite international border closures, accounting for 29 per cent of commercial property investments through the year, often using local representatives to get the deals done.
Overseas investors GIC and Blackstone dominated, twice selling each other major industrial portfolios.
In April, GIC funded the ESR bid for Blackstone’s Milestone Logistics portfolio, while late in the year Blackstone bought GIC’s 49 share in the Dexus Australian Logistics Trust for $2.1 billion.
“The Australian market has bounced back significantly better than many global peers, particularly in the office and retail sector,” said David Green-Morgan, who leads RCA’s Asia-Pacific research team.
“Australia is one of the very few major markets that saw retail volumes increase on pre-COVID averages.“
Article Source: www.afr.com
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