Strong Signals For Melbourne Commercial Property According To Recent Report By CBRE
Despite ongoing volatility and uncertainty in the broader Australian economy, a flurry of recent transactions handled by CBRE Melbourne’s Commercial sales team is shaping as a lead indicator of buyer confidence amidst what is being described within the industry as the `Post COVID’ marketplace.
With a consistently held view from most property professionals acknowledging the growing uncertainty facing the commercial property sector, recent sales activity coming out of the Melbourne market are shedding a different perspective of where buyer sentiment currently sits according to State Director at CBRE, Josh Rutman.
“It is difficult to sugar coat it. As each day in mid-March passed, we were growing ever more concerned with what the potential impacts of COVID-19 was going to mean for our clients and subsequently our sales team.
“The period between March 11 and 22 was very quiet and it was difficult to get genuine buyer engagement for properties which we had listed and were instructed to sell on behalf of our clients,” Mr Rutman said.
According to a CBRE investment sales report just over $200m of commercial property has been transacted by its Melbourne-based team over the past nine weeks, making up just over a third of all reported transactions since the COVID-19 pandemic was declared on March 11.
The report confirms a range of different types of properties have changed hands including several significant assets. Among them are 355 Spencer Street - a heritage style commercial office building that sold to Sydney based Avari Capital Partners for $38.5 million, a Woolworths anchored neighbourhood shopping centre located in Keysborough South ($33.13m), a significant infill development site of 1.6ha in Glen Waverley ($23m), and a commercial office building in Frankston which is understood to have sold for around $20m.
According to Mr Rutman the report also points to the identity of several of the successful buyers being very well known players within the industry suggesting that not all buyers are in agreement as to what the near term future holds for the sector.
“We have been really pleased to see some of our regular customers make strategic acquisitions over the past nine weeks and it certainly puts somewhat of a spring in our step to know that several of the deals we have concluded have been to wellknown players in both the investment and development spheres.
According to the report, commercial office buildings have made up just over a third of all transactions to date, with a mix of vacant and well leased assets changing hands since March 11. It is understood that investors are actively seeking well located buildings in anticipation of a new approach to decentralised working by office users, which could see several metropolitan assets come back into vogue.
“There has been a good spread of these larger transactions, however what has been more surprising is the positive sentiment in the sub $15 million market, with just over 75% of all of sales being within this price bracket,” Mr Rutman said.
A trend within the report in relation to the sub $15 million transactions shows a groundswell of buyer interest in strip retail investment properties across Melbourne including recent sales in Clarendon Street, South Melbourne, Glen Huntly Road, Elsternwick, and Victoria Avenue in Albert Park.
Head of Strip Retail Investments for CBRE, Rorey James said “Investor confidence in strip retail is shining through at present. In speaking with these buyers, they point to what they believe will be a renewed level of trade as people show a propensity to shop closer to where they live in open-air streets where they can more safely congregate.
“They are also of the view that many locally based businesses within Melbourne’s strips could benefit from customers spending more of their discretionary income locally given many, for example, won’t be able to consider overseas holidays for some time,” Mr James said.
The third most traded asset class according to the report is development sites, which despite several headwinds for median house price growth, continue to trade at a steady rate.
The predominant site sales have been those that accommodate townhouses in inner and middle ring suburbs, as well as longer term landbanks that will service a growing need for residential accommodation in the coming years.
Mr Rutman said “Developers are taking a very strategic approach to acquiring the right landholdings to either deliver product that will still be in high demand now, or position themselves for the next cycle during which we expect to see a significant undersupply of quality dwellings for Victorians due to the huge fall in housing starts and approvals”
Mr Rutman concluded “For Melbourne in particular, we are going to be the most populous city in Australia, have a more diverse white collar industry base and a better connected transport network which many believe will see our market remain more resilient than other capital cities around Australia.”