P R E S S R E L E A S E CB Richard Ellis Pty Ltd
ABN 57 057 373 574
Level 26, 363 George Street
Sydney NSW 2000
T 61 2 9333 3333
F 61 2 9333 3330
FOR IMMEDIATE RELEASE 29 September 2010
For further information:
61 2 9333 3585
61 402 465 440
Capital markets start to come back to life
Sydney, NSW (29 September, 2010)
Commercial property transactions in Australia showed an encouraging rise in the 3rd quarter 2010
according to new research from CB Richard Ellis.
Properties sold on the direct market tallied AU$2.6 billion for transactions greater than $5.0 million
each. The 3rd quarter 2010 volume was 268% above the 2nd quarter 2010 and 75% above the same
quarter last year.
CBRE Executive Director, Global Research and Consulting, Kevin Stanley said sales activity has been
uneven for the past nine quarters with an average sales tally of $1.8 billion per quarter.
The September quarter 2010 volume was 70% above this average. However, the year-to-date volume
($4.6 billion) is still about 5.0% below the same year-to-date period in 2009.
Australian commercial property sales
2007-2010, by quarter
07 07 07 07 08 08 08 08 09 09 09 09 10 10 0
1/ 2/ 3/ 4/ 1/ 2/ 3/ 4/ 1/ 2/ 3/ 4/ 1/ 2/ 3/1
Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q
Source : CB Richard Ellis
Includes sales over $5.0 million
29 September 2010
Office sales dominate
Mr Stanley said the source and type of investors as well as the location and type of properties sold had
revealed some unusual trends in Q3.
The office sector attracted the lion’s share of investor funds, representing 70% of transactions in the
“Typically, this sector would account for around 50% of all transactions in any given period,” Mr Stanley
“However, in the current market this type of stock is ready to sell, with a large number of new office
buildings featuring long leases and attractive depreciation benefits available for incoming investors.
These properties are typically still held by the developers, who are ready to sell to free up capital to move
onto the next project. Many of these buildings are in the Melbourne and Brisbane CBD’s and Fringe
areas, which have just come through a major development cycle.”
Australian commercial property sales,
by sector 3Q 2010
Office Industrial Retail
Total sales : AUD$2.5 billion
Source: CB Richard Ellis (Sep 2010)
Mr Stanley said investors were also focusing on the bright prospects for income and capital growth in the
“This has been confirmed by strong recent employment growth and a level of net absorption in the CBD
office markets during the first half of 2010 which was over twice the long term average,” Mr Stanley said.
“While this hasn’t been enough to see rents rise yet, it has slowed the rise of vacancy rates in the major
markets and provided a much stronger outlook for 2011.”
Beyond the office sector, CBRE’s research shows that industrial property accounted for 23% of all sales in
the 3rd quarter, with retail accounting for just 7%.
29 September 2010
Mr Stanley said this was also atypical, in that these proportions were traditionally reversed. However, the
3rd quarter sales tally was boosted by a series of major industrial transactions, among them the $210
million-plus sale of the Salta portfolio – the largest industrial sale in Australia to date.
“REIT’s and private investors have been providing the industrial stock and investors are seeing
compelling pricing,” Mr Stanley.
“Yields are typically still above 8.50%, with a reasonable expectation of some measure of yield
compression off a high base in the coming years.”
Retail property sales stalled in the 3rd quarter, not through lack of demand, but a drop in the supply of
stock. Retail is renowned as a tightly-held sector, but this will be put to the test in the 4th quarter 2010
with the 34-property Woolworths portfolio set to hit the market.
Australia in hot demand
CBRE’s research shows that foreign investors accounted for a hefty 42% of all purchases in the 3rd
quarter, 2010 and 36% in the year-to-date. The annual share of foreign investment is typically around
Foreign direct commercial real
estate investment in Australia
$AU millions % share of total turnover
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20
Foreign investment (lhs) Share of total investment (rhs)
Source: CB Richard Ellis
* to 3rd quarter 2010
CBRE Senior Managing Director, International Investments, Rick Butler said the Australian story continued
to be a compelling one for foreign investors.
“Australia has the rare combination in the world at the moment of stability and transparency, coupled
with a strong economic outlook,” Mr Butler said.
“In addition, investors can still buy at a reasonable discount to pricing of just a few years ago. Perhaps
against expectations, the high and rising Australian dollar doesn’t appear to be reducing foreign
Speaking from Germany, Mr Butler said European investors continued to be active in the Australian
market. However in the 3rd quarter, Asian investors were the dominant buyer group, accounting for 56%
of all foreign purchases in Australia.
29 September 2010
New source countries also emerged during the quarter, with Malaysian Sovereign Wealth Fund
Permodalan Nasional Berhad making a first time Australian purchase in the newly completed Santos
House office building in Brisbane.
Mr Butler said another point of interest coming from the 3rd quarter, 2010 was the entry of South African
investors. On a by-country basis, South African investors were the second most active in Australia,
accounting for 21% of all foreign investment.
“Changes to investment exit laws have opened the doors for South African investors to target
opportunities in Australia,” Mr Butler said
Acquisitions have centred on Brisbane and Sydney and included office, retail and industrial property. Mr
Butler said this was a new feature in the local market and one likely to expand further in the future.
On the local front, Mr Stanley said the A-REIT’s continued to be largely out of the market on the buy-side
through the 3rd quarter and, indeed, in 2010 overall.
“Still mostly trading at a discount to NTA, this buyer group, which would typically account for about 30%
of all purchases, has little motivation to acquire, despite the major REIT’s being re-capitalised,” Mr
“To date in 2010, the A-REIT’s have purchased just 6.2% of all commercial properties sold.”
Pricing yet to show clear direction
Despite the pick-up in trading activity in the 3rd quarter, Mr Stanley said pricing was yet to show any
strong direction. Initial estimates from the 3rd quarter CBRE market survey suggest average weighted
yield remains broadly steady, with a slight bias to compression in the office sector. This has been the
case for most of 2010.
Weighted average yields across the sectors are quoted at 7.64% for Prime CBD offices, 6.24% for
Regional Shopping Centres and 8.70% for Grade A Warehouses.
“We expect office rents to start to rise in the major markets of Melbourne and Sydney in 2011, but later
in Brisbane and Perth,” Mr Stanley said.
“As a result, the various office markets around the country offer incoming investors a choice in expected
returns which haven’t been available since before the 2007 peak in the market. However, if you take just
a medium term view of, say, three years for any office market, you should be seeing values growing in all
markets through a combination of income growth and cap rate compression.”
Mr Stanley said the industrial sector was also generating significant interest, fuelled by quality assets
coming to the market, and this should be enough to see downward pressure on Grade A industrial yield
even before the end of 2010.
Retail was acting somewhat counter to the other sectors, hampered by slow consumer spending in 2010
and was unlikely to see any significant rise in value until 2011.
About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los
Angeles, is the world’s largest commercial real estate services firm (in terms of 2009 revenue). The
Company has approximately 29,000 employees (excluding affiliates), and serves real estate owners,
29 September 2010
investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis
offers strategic advice and execution for property sales and leasing; corporate services; property, facilities
and project management; mortgage banking; appraisal and valuation; development services; investment
management; and research and consulting. Please visit our Web site at www.cbre.com.