Global Investors Rush To Buy Commercial Property In Australia

Global investors are steering away from commercial property in the US and Europe and are rushing to buy office buildings in Australia, in order to take advantage of the attractive yields, Bloomberg said in an article.

Investors have been buying Australian office properties at the fastest rate since the end of 2011, with prime-office assets seeing the strongest uptick in demand since 2007, which is in line with the global results for assets delivering higher returns due to the reductions of interest rates by central banks across the globe.

Although the rental market seems subdued in the Australian context, it probably looks more stable when compared to the US and Europe, Rob Sewell, head of office investments at Jones Lang LaSalle’s Sydney office, told the news agency.

Since 2010, office values in Sydney have increased by less than 3% after recording a 6.7% decline in 2008, when Lehman Brothers filed for bankruptcy, and a 12% drop in 2009.

Data from Jones Lang LaSalle showed that between January and March 2013, prime offices in local larger cities fetched yields of around 7.9%, which is higher than the 5.25% for London City prime offices and the 4% – 5% for prime offices in business districts in New York and San Francisco.

Premium office space in Sydney had an average value of $16,235 per sq m in the period against $18,095 in 2008, broker Savills Plc estimated.

According to Real Capital Analytics, offices in Sydney had an average capitalisation rate of 8.8% as at the end of April, which is up from 5.7% in London, 5.2% in Manhattan and 3% in Hong Kong.