Big Australian commercial deals help CBRE post strong third-quarter results

Offshore investor activity has helped drive strong revenue growth in CBRE’s Asia-Pacific and Pacific regions, with demand for Australian commercial assets particurlarly strong, according to third-quarter global figures for the period ending September 30, 2011. 

Across Asia Pacific, revenues increased by 24% relative to the corresponding period in 2010, with CBRE noting “strong growth in Australia/New Zealand, China, India and Japan”. 

In the Pacific, third-quarter revenues were 29% ahead of the third-quarter of 2010 on a US dollar basis. 

Globally, CBRE revenue for the quarter totalled US$1.5 billion, an increase of 21% from US$1.3 billion in the third quarter of 2010. 

Commenting on the strong performance in the Pacific region, Tom Southern, president and chief executive of CBRE Australia and New Zealand, said the level of investor activity had been “noteworthy” coming despite the ongoing volatility in overseas financial markets. 

“Foreign buyers have led the charge, with offshore investment in the Australian commercial property market reaching a two-decade high in the third quarter. 

“Our data shows offshore-based institutions and private investors accounted for 41% of the $2.49 billion in commercial sales (individual transactions of at least $20 million) in the third quarter – well above the long-term average. 

“The relatively high yields available in Australia, combined with the relatively low economic risks, are underpinning buyer interest, with yields here having shown very little compression compared to what’s been experienced in other gateway cities around the world.” 

Southern said private investors and institutions from Singapore have been the most active purchasers. 

A highlight of the offshore deals negotiated by CBRE was the $395 million sale of 259 George Street, Sydney, to Memocorp. 

“In the third quarter we also saw the long-awaited emergence of mainland Chinese investors and a number of US-based groups are also reviewing opportunities in the region following the 20 Martin Place, Sydney sale to Pembroke Real Estate [a deal also negotiated through CBRE],” he added.

During the third quarter, CBRE also negotiated a new 12-year, 28,000-square-metre lease for Deloitte at Grosvenor Place in Sydney.

Overall, Southern says the most significant commercial investment and leasing activity has been occurring in the resource- and mining-driven centres of Queensland and Western Australia, where CBRE negotiated some significant sales and leasing transactions, including representing Ernst and Young and Rio Tinto in some of the city’s largest lease transactions for 2011.

Retail leasing was dominated by offshore retailers like Topshop and Zara seeking opportunities, with Southern adding “extremely weak retail trading conditions in Europe and the US, particularly in relation to luxury and fashion items” was driving retailers to consider “previously untapped markets where they can maximise their returns by offering a point of difference”.

“This has been borne out by the strong performance of Zara in Australia, where some of its strongest trading stores on a global basis are located. This has encouraged the likes of Topshop, Uniqlo, H&M, Abercrombie & Fitch, Forever 21 and more recently WH Smith to seek out opportunities in this region,” he added.

Globally, CBRE property sales rose 23% for the quarter, driven by exceptionally strong growth in the Americas (up 42%).

Commercial mortgage brokerage revenue rose 32%. For the quarter, global mortgage activity (loan originations and sales) improved 52% from a year ago to approximately $5.8 billion.

Property leasing revenue was also up strongly, rising 19% globally for the quarter.