Australia Commerical Real Estate

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WA heading for big commercial slump, survey shows

Larry Schlesinger
518 words
15 May 2015
The Australian Financial Review
AFNR
English
Copyright 2015. Fairfax Media Management Pty Limited.

The writing is on the wall for the Western Australia commercial property sector, the latest NAB Quarterly Commercial Property Survey shows.

The collapse in iron ore prices, the pullback in the mining sector and an overall weaker economy compared with the east coast states is expected to lead to a slump in Western Australia office and industrial capital values and rents, with a smaller correction expected in the retail property sector.

"A lot of it has to do with the fact that the WA economy is struggling and the common theme is the fall in commodity prices," NAB chief economist Alan Oster told The Australian Financial Review. "Mining and mining services make up about 20 per cent of the WA economy."

NAB said the West Australian office sector would be the worst affected, with capital values forecast to fall 15.6 per cent and rents to fall 20 per cent over the next two years. In the industrial sector a nearly 10 per cent correction in capital values is forecast, with rents to tumble 9.2 per cent.

Insulated by a tighter vacancy rate and a national rebound in retailing, the outlook for Western Australia's retail property sector is more benign, with a 4.2 per cent slide in capital values and a 6.4 per cent fall in rents forecast by the estate agents, managers, owners and investors who took part in the survey.

Outside Western Australia the outlook for the commercial property sector improved, with the NAB index rising to a four-year high of six points, from a reading of minus two in the previous quarter. NSW and Victoria were the most optimistic states for commercial property and CBD hotels the best-performing sector.

Over the next two years, NSW offices values are forecast to rise 7.9 per cent, ahead of Victoria (5.7 per cent) and Queensland (1.1 per cent). NSW is the only state expected to record growth in office rents, with a forecast rise of 6.3 per cent over the next two years.

In the industrial market, the outlook for capital growth is strong in NSW and Queensland, at about 6 per cent over the next two years, while both states also have the best rental growth expectations. Queensland retail property is also expected to perform strongly, outperforming Victoria and NSW on capital growth and with a small rise in rents also forecast.

Mr Oster said Queensland was less exposed to iron ore and more exposed to LNG than Western Australia and was also benefiting from growth in tourism and foreign investment in the residential sector.

"Our residential survey ranked Sydney first ahead of Melbourne, but respondents said that in next 12 to 18 months it could be Brisbane. There has also been some investment into the Brisbane CBD apartment market by foreigners investors, which is not happening in Perth," he said.

Key pointsCollapse in resources earnings expected to lead to slump in WA commercial values and rents.

Mining and mining services about 20pc of WA economy.


Fairfax Media Management Pty Limited

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The fourth wave of Chinese investment
Robert Harley
540 words
26 May 2015
The Australian Financial Review
AFNR
English
Copyright 2015. Fairfax Media Management Pty Limited.

A fourth wave of Chinese capital is set to wash over Australian commercial and development real estate. Chinese buying of Australian commercial and development real estate, which jumped to $4.37 billion in 2014, was the highlight of Chinese investment in the country during the year according to a new report, Demystifying Chinese Investment in Australia from KPMG and the University of Sydney, China Studies Centre.

Analysis for the report, by global agency Knight Frank, identified a new group of Chinese property investors about to make their local mark. "This group constitutes not only big-name companies, but also Ultra High New Worth Individuals UHNWIs, small- to midcap State Owned Enterprises, and smaller, private developers," Knight Frank's group director, head of research and consulting, Matt Whitby said.

The first wave was the sovereign wealth funds, banks and private funds investing in core, trophy assets. Then came the large developers, aiming to sell apartments in China and locally, and they were followed by a third wave of equity investors and insurance firms seeking core value-adds and yield driven opportunities. "What started as sovereign funds making exploratory investments has proliferated into investment sprees by Chinese developers, banks, ultra high net worth individuals (UHNWI's) and institutional investors such as insurance companies," Mr Whitby said.

As the buyers have changed so have their purchases, Mr Whitby said.

"After heavy investment in prime office buildings and subsequent yield compression in gateway cities, Chinese investors have begun to look increasingly at opportunities in other key cities and other property sectors, and importantly, in suburban locations in metropolitan Sydney, Brisbane and Melbourne - not just within the CBD and fringe markets," he said.

"In the commercial sector, retail and hotels will garner more interest following relatively subdued activity over the past few years by comparison to residential development sites."

The outflow of Chinese capital is global. China's President Xi Jinping in his speech at the APEC Forum in Beijing in 2014 said that accumulated Chinese outbound investment had reached $US660 billion ($842 billion) in 2013 and would reach $US1.25 trillion over the next decade. Last year Chinese property players bought $US16.9 billion of commercial real estate around the globe, up from just $US600 million in 2009. Knight Frank estimate, based on the sales so far this year, that the outward investment will tip $US20 billion this year.

Knight Frank said the surge had been been fuelled by a combination of push and pull factors. Investors and developers with extensive domestic exposure, were looking to offshore investments to diversify risk in markets that offered better returns and lower funding costs. For those investors, the main Australian cities offered "deep, liquid and transparent markets with scale."

The fall in the Australian dollar, and the proposed Free Trade Agreement, have helped and the new Foreign Investment Review Board rules are not a hindrance.

Knight Frank identify other reasons.

"The quality of life, weather, clean air and world class education institutions all act as a magnet to Chinese developers and migrants alike; overseas acquisitions help Chinese institutions build their brands internationally and owner occupiers, like the big banks, use investments to help manage their future occupation costs."


Fairfax Media Management Pty Limited

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Jun 16 2015 at 10:16 AM Updated Jun 16 2015 at 5:07 PM

Global investment giants ride the education wave to student housing

Scape Student Living will build a new student campus in the Melbourne CBD.

by Matthew Cranston
A wave of investment in student housing is expected in Australia as developers seek to fill a supply shortfall in which there are 1.2 million students enrolled but only 54,000 purpose built student bedrooms available.

Institutional investors have started taking major positions in the sector from the Government of Singapore Investment Corporation, which entered into a joint venture with Macquarie Capital to buy a stake in student accommodation provider Iglu, to UK-based Scape Student Living which, backed by Dutch Pension giant APG, has just purchased two prime sites in Melbourne and Brisbane for $560 million worth of student accommodation.

JLL's national director for student accommodation services Conal Newland said there is a huge amount of opportunity to place money in the $20 billion sector.

"The sector has been quite fragmented but we are now seeing global investors participate," Mr Newland said.

"The major operators are looking to develop portfolios and it is inevitable that with these maturing markets there will be new paths of investment on offer."

In Brisbane there are 2086 student beds being assessment for development by the city's council. More than 280 have been been approved since the city's Lord Mayor Graham Quirk introduced an 80 per cent discount on infrastructure charges for student accommodation developments in February this year.

Chief executive Damian Haber, of accommodation provider The Pad, is getting close to managing 3000 beds in the city – a market where there is only one bed for every 13 students. He expects there will be a new range of student accommodation investment vehicles started in the next few years.

EMERGENCE OF MULTIPLE PUBLICLY COMPANIES

"If we look to the UK market example, what began as a university and real estate private equity led investment market is now an investment market characterised by multiple publicly listed investment companies in the sector," Mr Haber said.

"Significant institutional investment capital is quickly becoming attracted to the Australian student accommodation market given the strong macro demand story here and chronic shortage of suitable
purpose built supply."

He said Australia was still building the required scale that institutional investors needed in order to be able to make large investments.

With a falling Australian dollar, which is good for both students and investors, some groups have swooped on opportunities. Singapore-based private equity group Valparaiso Capital Partners snapped up Investa's former Boeing House office tower for $50 million and is converting the 14-level building to 1000 student beds.

ASX-listed private equity group Blue Sky is also swooping on development sites.

Blue Sky Private Real Estate's Adam Vaggelas said the company had been reviewing the sector as a key focus across its social real estate and infrastructure strategy.

"Although selective on locality, we believe there is room for growth and are actively reviewing sites across the country for new projects," Mr Vaggelas said.

"Market analysis indicates a shortage of available rooms across the country compared to established student accommodation markets like London."

BUSINESS EXPECTED TO DOUBLE

With so much capital waiting to be deployed into student accommodation, the chief executive of Australia's largest student accommodation manager UniLodge's Peter Bates expects his business will double within five years.

Mr Bates manages about 10,000 students dwellings for private individual owners as well as universities but he expects institutions will be the next major owners.

"Owning in one line as opposed to individual strata is where the model is heading towards," Mr Bates said.

"During the financial crisis banks really started to toughen up on their lending to strata and purpose-built property assets but that is starting to change."

The Bank of Queensland is one bank that is active in the sector.

Bank of Queensland's general manager for business banking Doug Snell said the bank had changed its view on student accommodation.

"During the financial crisis we didn't have an appetite for that type of product but we have now taken a view across the whole lifestyle accommodation sector, which includes everything from student accommodation to aged care."

"However, we must be able to see that each asset we fund has an alternative use besides student accommodation. We have one project where there is very high quality amenity so that if it needed to be changed back to residential apartments it could."

He said the bank was sticking to established operators more so than "new investors who are jumping on the band wagon".

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un 30 2015 at 6:17 PM Updated 1 hr ago

Less buying but stronger prices for Australia's office towers and shopping malls

The Future Fund sold its stake in the Waterfront Place tower in Brisbane at a price 46 per cent higher than it paid in 2011.

by Robert Harley

The investment in Australia's office towers, shopping centres and industrial facilities dipped markedly in the June half but not because of any weakness in demand.

Sales above $5 million in the retail, office and industrial sectors totalled $9.9 billion in the six months according to preliminary figures from JLL. By comparision $13.4 billion of property changed hands in the first six months of what became a record 2014.

At the same time, $1.9 bnillion worth of hotels, and $850 million worth of pubs, changed hands.

JLL's head of office investments in Australia, Rob Sewell, said the lower transaction volumes were not a sympton of reduced interest.

"Investor demand across a range of buyer cohorts remains robust," he said. "We expect that overall transaction volumes will recover in the second half of the year."

If anything, the buying pressure is increasing. At least that is what the prices show.

A week before the end of the financial year, the Future Fund sold its stake in the Waterfront Place tower in Brisbane at a price 46 per cent higher than it paid in 2011.

And just days before the end of the half, Lend Lease sold its third tower on Sydney's Barangaroo – confusingly known as Tower 1 – on strong metrics. The yield appears to be under 6 per cent and the price per square metre is around 30 higher than that struck on the adjoining towers in 2012.


At the other end of the market, Arena REIT last week sold three childcare centres for a combined $6.2 million at a 58 per cent premium to book value.

Mr Sewell said that overseas investors, particularly from within Asia Pacific, had been drawn to the market by the weaker Australian dollar, attractive yields, high transparency and sound governance.

"We expect these key drivers to support overseas investment into Australian commercial property for the remainder of 2015 and into 2016," he said. "Greater competition means investors will have to become more aggressive in pricing assets."

The transaction volumes in 2014 were boosted by a number of large deals and a number of fund-through opportunities.

Mr Sewell said a number of large transactions were in the pipeline for the second half of 2015, including the sale of the Investa Property Group platform and its $2 billion or more in office tower assets, and the sale of GIC's Australian logistics portfolio at an estimated value of more than $1 billion.

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China Investment Corporation favoured for Investa Property
THE AUSTRALIAN JULY 08, 2015 12:00AM

Bridget Carter

Mergers & Acquisitions Editor
Sydney
Gretchen Friemann

Mergers & Acquisitions Editor
Sydney
Chinese in pole position for Investa
DataRoom Source: TheAustralian

China Investment Corporation, the world’s fourth-largest sovereign wealth fund, has moved into pole position for Morgan Stanley’s $8.9 billion-backed Investa Property Group, even as rival suitor Cromwell Property Group strengthens its consortium with the inclusion of the Future Fund.

Australia’s $117bn sovereign wealth fund has thrown its weight behind Cromwell’s tilt by offering a higher-yielding mezzanine loan, alongside one of Australia’s largest superannuation funds, First State Super.

The final configurations for the Investa assets emerged as Morgan Stanley and its adviser, UBS, started to sift through second-round bids after yesterday’s midday deadline.

Investa’s chief drawcard is its directly held portfolio of office towers, which have a face value of $1.9bn but may fetch close to $2.4bn, implying a net yield of between 5 per cent and 6 per cent.

Competition for the assets has been red hot since the race began in February, with close to 50 parties expressing interest in the first round.

That figure has been whittled down to five contenders, and after an exhaustive period in due diligence, the contest will near a close early next week when one or two parties will enter into exclusive negotiations.

The decision could trigger further jostling in the field.

According to sources the consortia in this latest round may separate if that delivers a competitive edge.

So CIC, which has joined forces with LaSalle Investment Management, may shed its partner if the Chinese fund wins a bid for Investa’s directly held portfolio but falls short on the management platform, which is expected to fetch well over $180m.

Citi is advising the LaSalle-CIC group.

According to sources, China’s state-backed investment vehicle, which also holds a substantial slice of the warehousing landlord, Goodman Group, has been keen to achieve scale in Australia’s commercial property market for some time. Its acquisition of Investa would represent a coup for Morgan Stanley, which picked up the business in 2007, shortly before the global financial crisis struck, and would potentially wipe out the loss that investors in its MESREF VI fund were facing at the start of this sales process.

But the falling Australian dollar, combined with sinking long-term interest rates — both compounded in recent days by Greece’s escalating debt crisis — has helped lift demand.

Investa’s high occupancy rates and its exposure to Australia’s most populous cities, has also been a factor.

Blackstone, the New York-based private equity firm, was initially touted as the strongest contender for the business.

As DataRoom revealed earlier this year, the buyout fund has teamed up with Mirvac in its tilt for Investa. It is understood Blackstone is not in negotiations with CBRE.

Another favourite, Brookfield, has also fallen in the rankings. The Canadian heavyweight had been attempting to assemble a special vehicle to hold the Investa assets, but it’s understood the focus has weakened over the past week.

Its slackening appetite has been attributed partly to its surprise $8.8bn takeover play for Asciano, launched last week.

The Goldman Sachs-advised Dexus consortium has also run hard at Investa. The listed office landlord, headed by Darren Steinberg, has enlisted the support of the Middle Eastern fund, ADIA, along with two Asian funds, according to sources.

But Dexus’s tilt may be hampered by fears of its widening grip on the office sector.

Morgan Stanley initially wanted to offload the business to one bidder. But to achieve that aim, the suitors will need to win the backing of Investa’s two subsidiary funds, the listed IOF and its unlisted stablemate ICPF.

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Jul 16 2015 at 12:15 AM Updated 1 hr ago
Sydney, Melbourne tighten as Perth sags

Sydney and Melbourne office towers are filling with tenants but the news is not good for Perth. Ryan Stuart

by Robert Harley
Sydney and Melbourne office towers are finally filling, as towers in Perth rapidly empty.

Business and government leased more than 205,000 square metres of space across the six key central business districts in the past year, dropping the national vacancy rate to 11.5 per cent.

JLL's head of strategic research in Australia Andrew Ballantyne said the domestic lead indicators for the office sector improved in the June quarter with corporate Australia responding positively to the federal budget and a more accommodative monetary policy.

But the national figures hid a stark difference between the domestic growth centres of Sydney and Melbourne, and the smaller CBDs, hit hard by the downturn in resources and government cost cutting.


As Perth struggled with the end of the resources boom, business quit more than 50,000 square metres of space in the past year. The vacancy rate rose to 17.4 per cent, the highest level since 1999, and prime gross effective rents collapsed by 15.5 per cent over the year.

Mr Ballantyne said the the office market recovery was gathering momentum in Sydney and Melbourne.

JLL's head of office leasing in Australia Tim O'Connor said the takeup of space in Sydney in 2014-15 was the highest since 2005-06 and the A-grade vacancy had halved in the past year to 5.6 per cent.

SPACE AT A PREMIUM

"The momentum in the Sydney office leasing market will intensify the competition for space over the 2015-16 financial year, with incentives expected to move lower over the second half of 2015," he said.

The DEXUS office demand barometer for the June 2015 quarter, released on Wednesday, also pointed to improving demand in Sydney. DEXUS general manager research Peter Studley said the lift in business confidence in the past few months was a positive indicator for office demand.

Melbourne also had positive takeup, but the vacancy rate rose marginally as backfill space became available.

Mr O'Connor said recovery in the Melbourne CBD was supported by the expansion of tenants taking less than 1000 square metres.

In Brisbane, Perth, Adelaide, and Canberra, the fundamentals were weaker and the prime gross effective rent had fallen over the past year, JLL said.

But Mr Ballantyne noted Canberra, helped by the federal budget, and Brisbane had both recorded positive office takeup in the quarter.

The Adelaide CBD also recorded negative net absorption, accompanied by a "sharp correction in prime gross effective rents" which dropped 4.2 per cent over the quarter and by 10.9 per cent over the financial year.

PERTH MARKET SLOWED

Mr Ballantyne also noted the rate of tenant contraction had slowed in the Perth CBD.

"We believe that the bulk of the downsizing has already occurred. The main risk to Perth's vacancy rate in the short term will be on the supply side of the equation with 135,000 square metres or 8.2 per cent of the total stock to be delivered in the second half of 2015."

Mr O'Connor said corporate Australia was focused on top-line revenue growth to expand profit margins.

"Real estate is a strategic enabler of growth objectives, while positive net absorption is a sign that businesses are expanding their footprint to accommodate head-count increases. We expect to see an increasing number of expansionary requirements and stronger demand from a broad range of industry sectors as we move through the 2015-16 financial year."

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Sydney drives fall in industrial vacancies
Larry Schlesinger
510 words
29 Jul 2015
The Australian Financial Review
AFNR
English

Industrial vacancies on the east coast fell for the first time in more than three years, with the recovery driven mostly by a stronger NSW economy, rising levels of housing activity and the state's massive infrastructure program.

Vacancies across the east coast capital cities fell 6.6 per cent to 2.38 million square metres over the June quarter, the first fall recorded by Knight Frank since April 2012.

Sydney was the only market to record both rising levels of leasing activity - a record 266,000 square metres leased over the quarter - and a decline in industrial space available for lease, which fell 28 per cent to 574,000 square metres.

"Underlying demand in Sydney is being supported by retail sales continuing to grow above the national average; the sharp lift in housing activity; and the positive impact of state government plans to reallocate $20 billion to infrastructure projects," said Knight Frank's head of research, Matt Whitby.

The April hail storms, which hit the outer south west Sydney market, damaged many buildings and accounted for 106,000 square metres of short-term leasing over the quarter as companies sought alternative premises.

Knight Frank said some of the sharp fall in the Sydney vacancy rate would unwind over the course of the next year as damaged facilities were repaired.

But even when excluding the hail-induced spike in Sydney, Knight Frank's head of industrial, Greg Russell, said demand for industrial space was "well above the long-term average take-up" with a rebound in take-up in Melbourne and Brisbane as well.

Brisbane leasing deals over the quarter totalled 116,000 square metres, close to the record result achieved in the December 2014 quarter and in Melbourne deals were up 24 per cent to 127,000 square metres.

But both cities recorded rising vacancies over the June quarter as businesses relocated to new, speculatively-built warehouses offered on very attractive terms, leaving behind vacant space in existing premises.

In Brisbane, vacancies levels rose 2.6 per cent to almost 700,000 square metres and in Melbourne they rose 5.3 per cent to a new record 951,000 square metres.

"Available prime space [in Brisbane] has continued to build, boosted by some sublease activity and also an increase in speculative development, with DEXUS commencing the remaining stages at Drive Industrial Estate, Richlands," Mr Russell said.

Knight Frank's head of industrial for Victoria, Gab Pascuzzi, said vacancies in Melbourne were expected to remain stable, as no new speculative stock was currently being built.

"Interestingly, vacancy within speculative space - both under construction and completed - fell by 20,630 square metres to 91,511 square metres in the past quarter, now accounting for only 9.6 per cent of the overall vacancy," Mr Pascuzzi said.

In Perth, the level of available industrial space rose 22 per cent to sit at 559,016 square metres as at July 2015, its highest on record and 97 per cent above the long-term average.


Fairfax Media Management Pty Limited

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Aug 4 2015 at 1:09 PM Updated Aug 4 2015 at 6:07 PM

High-net worth investors pump $35m into Woolworths retail property

Dan Murphy's in Gladesville, Sydney, sold at auction for $11.51 million.


by Larry Schlesinger

Investors pumped nearly $35 million into Woolworths-backed retail properties at a Burgess Rawson portfolio auction in Sydney, with tightening yields showing the appetite among private investors for retail premises backed by strong lease covenants.

In total 18 out of 23 properties sold under the hammer at the Four Seasons Hotel – a clearance rate of 78 per cent – with total sales reaching about $65 million, and numerous transactions on yields below 5 per cent.

ANZ and Westpac premises in Sydney, Brisbane, Port Douglas and Nambour all sold as did a KFC and Repco automotive store on the NSW Central Coast.

Four childcare centres sold, including one in Bundaberg which went post auction, alongside a Grill'd burger joint in Darlinghurst and a dumpling restaurant in Neutral Bay.

The premises of the Casula Fruit Market in Sydney's south-west were passed for $5.1 million as was a George Street central business district strata office floor and an industrial property in Parkes, NSW leased to the Agrium Group.

The standout results were the two, large-format Dan Murphy's liquor stores, which smashed price expectations, selling to wealthy Sydney buyers on sub-5 per cent yields.

A near-new Dan Murphy's on Victoria Road in Gladesville in Sydney's north-west, sold for $11.51 millon on a 4.6 per cent yield while a brand new Dan Murphy's on Crawford Street in Queanbeyan, NSW, adjacent to Canberra, sold for $11.3 million on a yield of 4.7 per cent.

Both properties have new 15-year leases in place with Woolworths plus renewal options to 2060.

Burgess Rawson director Graeme Watson, who forecast the Dan Murphy's liquor stores to sell for as much as $10 million with yields ranging from 5.5 to 6.25 per cent, said the results were "well and truly above expectations".

"We had over 350 enquiries for the two Dan Murphy's and seven bidders on each of the properties," he said.

"Freestanding properties leased to Woolworths are considered to be trophy investments. They offer long-term security, being single tenanted are easily managed and they also provide substantial income tax saving benefits," Mr Watson said.

The top selling property was a Woolworths-anchored neighbourhood shopping centre in Gungahlin, Canberra, which sold for $11.68 million on a yield of 6.3 per centre.

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Aug 5 2015 at 6:04 PM Updated 12 mins ago

Bunnings buyer warns investors as $130m splashed out on commercial property

Prabhash Goel spent $10.95 million on the Swan Hill Bunnings. Pat Scala


by Larry Schlesinger
Retired Adelaide doctor Prabhash Goel paid $10.95 million for a Bunnings warehouse in Swan Hill in regional Victoria on a record low yield of 5.1 per cent as investors splurged on retail and commercial property, sending prices soaring and yields tumbling.

In total, investors splashed out $130 million on retail and commercial property over two days of frenzied bidding at packed Burgess Rawson portfolio auctions in Melbourne and Sydney.

Dr Goel, who also bought the Bunnings in Ballina last year for $21.3 million – both investments made on behalf of his family – said he was very happy with his investment despite the low yield which set a "new marker" for the asset class.

"Wesfarmers is one of the best leases around for commercial property. The yield is low, But If you look around, good long term leased property is being sold on low yields," he said.

Dr Goel, who also owns Wesfarmers shares, said he would buy more Bunnings property for his family, but warned other investors who snapped up childcare centres, bank branches and even a digital sign above Flinders Station, which sold for $3.05 million at the Melbourne and Sydney auctions, could be caught out if interest rates started to rise.

"We have got other cash businesses, so we can sustain any interest rate rise, but [we're] not sure that other investors can."

Dr Goel's acquisition was one of the standout results at the two portfolio auctions, where a 76 per cent clearance rate was achieved with properties backed by leases to Wesfarmers and Woolworths the most sought after.

YIELDS TO COMPRESS

Diversified industrial with interests including retail operations covering supermarkets, general merchandise and specialty departments stores, fuel and liquor outlets and home improvement and office supplies; coal mining; gas processing and distribution; insurance; chemicals and fertilisers; and industrial and safety product distribution.


Burgess Rawson director of valuations, Tim Perrin, said commercial yields would continue to compress and prices rise as long as interest rates remain low.

"The more conservative investors are being drawn out of cash and bonds, where returns are so low, and looking at some of the lease covenants backing these properties. They are seeing that the security they offer is almost as good as bonds, but at much higher yields, " Mr Perrin said.

He added that a striking feature of the market was the appetite for the major brands, principally Coles or Woolies. "It doesn't matter if it's a Dan Murphy's, a Bunnings or a supermarket."

Investors Tom and Karen Zafir, who missed out on a childcare centre, questioned some of the buyer behaviour, which included incremental bids in the hundreds of thousands of dollars.

"We are not working in a rational market," Mr Zafir said.

"Buyers don't appear to be doing their due diligence. We had the contracts for the childcare centre checked over by our lawyer, but other buyers are not doing that," said Ms Zafir,

Asked if they thought some of the buyer behaviour resembled punters at the pokies Mr Zafir said: "That's a pretty good analogy."

Also at the auction, a Bendigo office property leased to the state government on a 10-year lease sold for $7.31 million on a very low 4.4 per cent yield

"Somebody really wanted it," remarked one bemused punter.

The freehold digital advertising sign opposite Flinders station was bought by a Sydney investor who also owns a sign in North Sydney. A Brisbane investor bought the Dan Murphy's liquor store in Broadmeadows Melbourne.

"[A yield of] six has become the new five," said Burgess Rawson selling agent Shaun Venables.

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Aug 6 2015 at 12:15 AM Updated 53 mins ago

Brisbane's empty office property reduced for first time in 3 years

Brisbane will see the construction and completion of 180 Brisbane, 480 Queen Street and 1 William Street all due within the next 12 months.


by Matthew Cranston
Brisbane's empty office space has reduced for the first time in three years, however it has not been growing demand from tenants fixing the problem but landlords withdrawing available space.

The city's vacancy rate dropped to 15 per cent in the six months to June from 15.5 per cent in January and is no longer the worst capital city market in the country with Perth's vacancy leaping ahead to 16.6 per cent according to the Property Council of Australia.

PCA's Queensland executive director Chris Mountford said 36,096 square metres of space had been taken out of the Brisbane market through renewal and conversion but that the city still needed to be on watch for rising vacancy.

"Given the demand for office space remains in negative territory and almost 200,000 square metres of new space will be entering the market over the next 18 months, there is increasing pressure on owners to reposition older assets to take advantage of new markets," Mr Mountford said.


Brisbane will see the construction and completion of 180 Brisbane, 480 Queen Street and 1 William Street all due within the next 12 months.

HEADLINE VACANCY NUMBER

Colliers International national director for office leasing Mark McCann is warning landlords not to be complacent about the slight improvement in the headline vacancy number but says the pressure has eased.

"This positive change in the vacancy rate, however, is only temporary, with the overall vacancy expected to spike from 2016 onwards after completion of new developments and associated backfill," Mr McCann said.

"The secondary market continues to be the most volatile sector in the market due to its historically high vacancy rate however recent transactional activity in this sector has steadied the competitive parameters required to secure tenants."

He notes tenants such as UnitingCare, Slater & Gordon and software group Remserve took more than 10,000 sq m of space in that secondary sector during the first half of the year. B-grade office space vacancy now sits at 19.2 per cent down from 22.6 per cent in January.

Savills director for office leasing John McDonald said that with vacancy high, many tenants felt no urgency to finalise deals.

"Many tenants are well aware of the market and realise that with new buildings in the CBD all nearing completion, vacancy rates are likely to remain high for some time so early commitments are difficult to achieve."

JLL's head of leasing for Queensland said rents would reman under pressure and that the market's road to a stable vacancy would be reliant on a significant amount of secondary stock being withdrawn between now and 2017.

"While secondary market rents continue to soften, redevelopment or change of use will become a more feasible outcome," Mr Barrett said.

JLL estimates that over 190,000 sq m of space could be withdrawn over the next five year period equating to about 9 per cent of the total market.