Investors have spent $29 billion into commercial property particularly in retail, office, industrial and hotel assets in 2016, with almost one-third of the money coming from overseas sovereign wealth funds and rich individuals.
About $8.19 billion of these sales were attributed to foreign investors. The update comes as the property investment trust sector starts the report for year 2017.
The retail landlords are expected to be more subdued because of tenants being pressured of flat sales but the office and industrial-focused REITs are expected to produce solid results because of low vacancy rates.
Meanwhile, the hotel sector is emerging to be more active with plenty of developments and listings hitting the market. Investors are said to favour bricks and mortar assets because these provide stronger yields and sharper compression than parking their money in a bank account.
Reports show that offshore capital continues to enter the Australian commercial market, targeting office assets in the CBD along the eastern seaboard.
Yield compression will continue until the end of the 2017 financial year with limited stock creating tight competition between investors. NSW and Victoria reportedly experience rising demand for investment assets on infrastructure development, rising rental rates, tightening yields and population growth. In Melbourne alone, vacancy rates are set to fall to forecast levels of 4.3% by mind 2019.
According to reports, the strong demand and infrastructure investment had opened up opportunities for developers to build the next generation of commercial property assets.
These will boost the cities’ reputations as globally competitive. Australia’s population growth was also an important component. Office leasing has improved in activity by 18% with a 10% fall in A- and B-grade incentives, from 33 to 23% in A-grade stock and from 31 to 21% in the B-grade sector. One of the busiest sectors has also been in hotels and a high level of interest is expected from domestic and international buyers.
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