Commercial sales get to $1.4 billion aggregate in March 2012 quarter: CBRE

The sale of CFS Retail Property Trust’s 50% share of the Myer Centre Brisbane to unlisted property trust ISPT for $366 million helped boost first-quarter commercial sales to $1.4 billion nationally. 

According to CBRE analysis of all commercial transactions, sales in the traditionally quiet first quarter fell off sharply from the December 2011 quarter, but were still 18% above the first-quarter average recorded since the GFC.

The sale of the centre on a 6.5% yield was the largest retail transaction since Lend Lease’s Australian Prime Property Fund Retail (APPF Retail) acquired a 50% interest in Cairns Central for $261 million from Westfield Group in October 2011. 

The next largest deal was the Home Hub Hills Centre in Castle Hill in Sydney purchased by the La Salle Australia Core Plus Fund from developer Fenix Real Estate for $180 million. 

Retail was the most heavily traded sector comprising 51% of turnover, ahead of the office sector, which would normally be the most traded asset class, accounting for 37% of the total.

CBRE executive director of global research and consulting Kevin Stanley says this is a sign that investors are still keen to invest significantly into the retail sector, despite facing challenges of low consumer spending in some merchandise sectors and online retailing growing in popularity. 

Australian head of retail investments for Jones Lang LaSalle Simon Rooney, who brokered the Myer Centre Brisbane sale, says it demonstrated that “institutional investors view the current period as a window of opportunity to secure strategic exposure to the dominant, core regional shopping centre market that traditionally is rarely traded”.

Industrial property accounted for 12% of sales transactions. 

Foreign investors purchasing 43% of all assets sold by volume following a year when foreign investors purchased a record 37% share of all commercial properties sold above $20 million. 

Foreign investors active over the first three months of the year were all Asia-based, including La Salle Investment Management, Pramerica, Frasers Commercial Trust and Aviva Investors. 

Beyond foreign investors, local wholesale funds (26% of all purchases) and local private investors (20%) were also active. 

Geographically, Queensland accounted for 54% of all sales – a major deviation from trend – the state usually accounts for about 20%. 

“It appears investors are looking beyond the troubles of the past few years to the stronger economic growth which is now forecast to return to the sunshine state,” says Stanley. 

Stanley says concerns during the quarter centred on financial uncertainty coming from the Eurozone which was slowing investment decision making. 

“A slow start to the investment year is not uncommon in Australia, with January a holiday month, but the first quarter volume in both 2009 and 2011 was much lower than the $1.4 billion recorded in the first quarter of 2012,” says Stanley. 

“We think the prospects for rental growth in the office sector are still the brightest of all the asset classes and local and foreign investors continue to weigh solidly into the sector,” says CBRE regional director of institutional investment properties Rob Sewell.

Sewell says 2012 first-quarter sales activity had been impacted to an extent by an unusually early Easter break, with many vendors having delayed marketing assets until the second quarter. 

“We have a number of marketing programs ready to launch post Easter, including 6-10 O’Connell Street (a 25-storey B-grade office building in the Sydney CBD),” he says. 

Sewell says many institutions are showing a preference for assets with higher cash yields rather than lower yielding growth assets given ongoing wariness in relation to occupier demand. 

“Overall, we are seeing a lot more depth in the buyer demand, with more core plus institutional investors in the market, however the bulk of the funds are still seeking new, core assets,” he says