Australia is second only to Japan for inflow of cross-border capital in the region and this trend is set to continue, according to Savills global property chief Jeremy Helsby.
Demand from overseas investors like Wanda Group – China’s largest commercial property company – and the Fortune Global 500 Greenland Holding Group, will have a profound effect on the Sydney CBD office market.
“We see no reprieve in the interest in the Sydney market, and the continued interest from global investors will compete with the many domestic investors,” says Paul Craig, Savills Australia chief executive officer, adding that Savills expects to see a continued compression of capitalisation rates.
“Investment metrics will be spurred by the likely rental growth in the Sydney office market which will fuel capital value growth.”
Capital Transactions Growth in 2016
According to Savills research, there was $6.46 billion of Sydney CBD office transactions in the 12 months to March 2016. This is up 44 percent from $4.5 billion the year before.
In this calendar year, Savills has been involved in two thirds of the $1.6 billion that has transacted in Australia.
“The number is closer to $2 billion when you talk about how Savills Capital Transactions business has performed since late last year,” Helsby, who has led Savills since 2008, explains.
Savills recently negotiated the sale of Fortius’ 75 percent stake in Sydney’s 420 George Street to Investa Commercial Property Fund for $442 million.
This transaction follows Brookfield’s sale of One Shelley Street for $525 million to Charter Hall and Morgan Stanley, and Centuria and Blackrock’s purchase of the Zenith Centre on Sydney’s north shore, owned by DEXUS Property Group and GPT Group’s wholesale office fund, for $279 million. In both deals Savills was appointed by the vendors as co-agents.
Globally, Savills has also handled some of the world’s biggest recent deals, including London’s iconic Gherkin for $1.4 billion. Europe’s largest property transaction for 2016 – an acquisition in Poland worth $1.8 billion – was conducted by Savills, and in Asia the company sits at the top of broker rankings.
“We have fantastic relationships across Asia, but domestic investors are still competitive for quality assets supported by sound fundamentals,” Craig says.
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The above article has been extracted from the Property Council of Australia.