Approximately $3.5 billion in commercial property priced at $5 million and above was sold in the first quarter of the year in Australia, according to figures released by CBRE. A-REITs are returning to the market, in a sign that the market is off to a healthy start in 2013.
This figure represents a 15 per cent increase compared to the number of transactions that closed in the same period last year, according to Stephen McNabb, CBRE’s head of research for Australia.
Domestic investors made their presence felt in the quarter, with the level of properties being bought by locals increasing by one-third over the same time last year. Foreign investor activity was down by 31 per cent during the three-month period.
CBRE’s national director of capital markets, Josh Cullen, stated that the recent of level activity in domestic REITs seeking core investments across all property sectors was a good sign for this year.
He said, “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.
“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 per cent from a peak of circa 40 per cent, which would imply funding capacity of $6 billion if leverage moved back to a still conservative level of around 32 per cent.”
Cullen pointed out that one issue was the lack of quality stock available on the market. The inventory shortage was expected to result in “cap rate compression for core assets.”
Approximately $14.3 billion in commercial sales have been recorded for the 12 month period up to March 27. This is a one per cent increase over the $14.2 billion in sales recorded in the 12 months ending in March of 2012.