INVESTORS SEEK OUT HIGH-YIELDING ASSETS AS COMMERCIAL SALES SOAR
Amid commentary that official interest rates could fall further to a record low 1.5 per cent in the coming year, demand for higher-yielding bricks and mortar is simultaneously rising.
Sales at the larger end of the curve are expected to reach more than $5 billion in the coming year as more landlords look to take advantage of the cashed-up investors.
The deals range from office towers to retail malls and also the recent $1.1 billion of industrial properties.
Colliers International is also in the throes of selling a $250 million portfolio of industrial assets on behalf of JP Morgan.
In offices, there is said to be a $250 million portfolio being reviewed for sale by Charter Hall.
Knight Frank’s director of NSW research, Nick Hoskins said year-to-date deal volumes in value terms already exceeded the previous high recorded in 2014 ($4.93 billion versus $4.64 billion). This largely reflects two significantly large transactions, namely the purchase by China Investment Corporation of the Investa Property Group portfolio and the sale of Tower 1 at Barangaroo into a new wholesale fund for about $2 billion.
According to research by Ray White Commercial, the retail industry has also been particularly active over the past two years, with a significant improvement in food and convenience-based retailing in particular.
This positive uptick in retail trade has spurred on strong demand for neighbourhood and convenience centres by private investors as well as offshore groups, particularly in the sub-$30 million price range.
Ray White Commercial NSW managing director Jeff Moxham said the low interest rates and the weight of capital was likely to keep the momentum for retail investment strong, particularly in the lower price range as investors looked to diversify from the heated residential market.
Another recent sale at the lower end was of 434 Oxford Street Bondi Junction for $13.4 million to the Chen family on a 4.9 per cent yield. It is leased to St George Bank.
Located on the Oxford Street Mall, the three-storey, freehold retail building comprises 957 square metres of retail on a 360 sqm site area and comprises ground-floor retail banking, first-floor business banking premises and a lower ground floor.
it was sold through Linda Zhu, Dominic Ong, Andy Hu and Daniel O’Brien of Knight Frank.
Ms Zhu, Knight Frank’s associate director, Asian Markets, said the area was tightly held, which saw a hectic auction process.