Australian commercial real estate activity reaches $11.7bn in Q1

Australian commercial real estate activity reaches $11.7bn in Q1

Australian commercial property sales continued on a positive path at the start of 2022 as dealmaking edged ahead of the total from a year ago, according to the latest Australia Capital Trends report from Real Capital Analytics, a part of MSCI.

Transactions across the property types reached $11.7 billion, an  all-time high for the first quarter of a year, which was also 4% ahead of Q1 2021; the previous record holder. For the past 12 months, dealmaking in Australia rose 77% on the prior period.

Benjamin Martin-Henry, Real Capital Analytics’ Head of Real Estate Research, Pacific, said: “2022 has picked up from where 2021 left off, with record levels of transactions as investors continued to show faith in the Australian commercial property market despite mounting pressures on the global economy.”

The retail sector continued its recent good run and some sizeable deals have occurred despite Q1 2022 levels ebbing in comparison to Q1 2021. While there was a deal drought in the major-regional shopping centre category since early 2020, four major assets have transacted in recent months. In the largest retail transaction of the year so far, GPT Group sold Casuarina Square to Sentinel Property Group for $397 million.

The office sector posted an 18% decrease on the same period of a year ago, but there were some encouraging signs with contracts exchanged on several significant acquisitions. Major office deals that closed in the quarter include the purchase of Blue Tower in Brisbane by Marquette Properties for $422 million, and Abacus Property Group’s acquisition of 77 Castlereagh Street in Sydney for $250 million.

The industrial sector continued at full steam, posting the highest level of volumes in the first quarter of a year for the sector. Deal volume totalled $4.1 billion, eclipsing the retail sector that reported $2.7 billion in first quarter deals and the office sector with $3.4 billion.

Dealmaking momentum continued for the hotel sector following its 2021 rebound. For the 12 months through the first quarter, deal volume more than doubled in the prior 12 months with the biggest deal of the quarter being that of The Sofitel Wentworth in Sydney, which was sold to KKR in a joint venture with Futuro Capital for $315 million.

David Green-Morgan, Real Capital Analytics’ Head of Real Estate Research, Asia Pacific, said: “Overseas investors have long been attracted to trophy assets in the hotel space in Australia, and after a Covid-induced hiatus, they have returned in 2022 with some sizeable acquisitions.”

Overseas investors were involved in $4.7 billion of commercial property transactions in the first quarter, which translates to 40% of all acquisitions. Cross-border players were involved in over $450 million worth of hotel acquisitions: almost double that of domestic investors.

Note: All values in Australian dollars.