Commercial property sales up 15% in first three months of the year with A-REITS returning: CBRE

Around $3.5 billion of commercial property priced over $5 million changed hands over the first quarter of the year with A-REITs returning to the market, according to CBRE.

This is a 15% increase compared to the same time last year.

CBRE’s head of research for Australia, Stephen McNabb, says the data signals a healthy start to the calendar year.

Domestic investors were prominent over the quarter with the the level of domestic buying 33% higher in the first quarter  of 2013 when compared with  the March 2012 quarter.

However, foreign purchaser activity was down 31% for the quarter.

CBRE national director of capital markets Josh Cullen says the re-emergence of the domestic REIT’s seeking core investments across all property sectors was a positive sign for 2013. 

“In the past week alone we have received in excess of $4.5 billion worth of offers with the closure of sales campaigns for Raine Square in Perth and the GE Core portfolio,” says Cullen. 

“The local REIT’s are well positioned with both balance sheet and wholesale capacity to take advantage of quality offerings in the market place. Leveraging has reduced to around 26% from a peak of circa 40%, which would imply funding capacity of $6 billion if leverage moved back to a still conservative level of around 32%.”

A-REIT acquisitions are up by $1.4 billion over the year to March 27, 2013 compared to the previous year.  

A-REITs  have become net purchasers over the period.

Assuming 10% of the current $30 billion in super fund cash allocations was also directed to domestic property, CBRE estimates that some $3 billion in A-REIT and superannuation money could find its way into the property market. 

However, Cullen says one issue was the lack of quality stock openly available and this was expected to result in cap rate compression for core assets.

Around $14.3 billion in commercial sales have been reported for the 12 months to March 27,  a 1% increase compared with the $14.2 billion recorded in the year to March 2012.