Perth hits investment volume records

18 July 2018

The first half of 2018 saw $255 million invested into the Perth CBD office market, bringing the 12 month rolling year to June 2018 to $827 million, according to Savills Australia’s latest Quarter Time National Office research report.

Savills Australia’s Associate Director for Research & Consultancy, Katy Dean, said on a rolling year basis through to June 2018, investment volumes are more than three times the value recorded at same time last year and the highest level recorded in the market since June 2013.

“While the 12 month period to June 2016 reached almost $800 million, the year in between had very little transactional activity with just three major assets being exchanged through that period including 109 St Georges Terrace for $71 million, Westralia Plaza for $87 million and 80 Stirling Street for $3 5million.”

“The last 12 months has been characterised by Australian real estate trusts and funds trading large-scale assets and offshore groups investing; the weight of capital entering the Perth market is significant,” Ms Dean said.

“The level of investment by offshore groups is the largest seen over the last decade and is indicative of the counter-cyclical strategies being deployed by both foreign investors and domestic groups.”

Savills Australia’s Perth’s Managing Director, Graham Postma said the business has been talking about investor appetite for counter-cyclical and repositioning opportunities for some time now and still do not believe this has fully run its course yet.

“This rise in investor appetite is reflective of confidence levels on the back of improvements in the leasing market, with declining vacancy and rising occupier demand,” he said.

”Effective rental growth will become evident in the Premium sector of the market over the balance of 2018 and into 2019 which will then flow into the A Grade sector from there”.

Savills Australia’s Associate Director for Capital Transactions, Nick Charlton said competition for quality assets in Perth is increasing with new investors, domestic and offshore investors looking within Perth to invest capital.

“There is already examples of this recently with OKP Holdings acquiring 6-8 Bennett Street for $43.5 million, their first overseas acquisition and Elanor Investors Group acquiring their first Western Australian office asset with the acquisition of Workzone West for $125.25 million,” Mr Charlton said.

“While the office market is likely to remain the primary focus for offshore investors in the short-term, we wouldn’t be surprised to see the interest to spread to value-add opportunities and potentially West Perth as it gets more competitive, particularly between local privates and institutional funds who are looking at Perth again on the back of improving fundamentals.”

Mr Charlton further stated assets have been exchanged on market yields around 7.00% and comparatively speaking this is still high relative to other Australian markets, particularly Sydney and Melbourne.

Mr Postma said this weight of capital against the available opportunities has put downward pressure on yields and on average A grade asset yields have compressed a further 25 basis points over the last quarter.

“Investors remain confident in the performance of Perth’s office market and this is reflected in the high levels of capital being injected into the city over the last year,” he said.


Key Contacts

Graham Postma

Graham Postma

National Head - Office Leasing and Managing Director - WA

Savills Perth

+61 (0) 8 9488 4153