Melbourne CBD institutional sales set to soar
May 18, 2011
More than $400 million of major office stock has been sold in the Melbourne CBD since the start of the year, pointing to a big year ahead, according to the latest analysis of sales data by Colliers International.
Nick Rathgeber, Colliers International Director – Institutional Investment Services, who undertook the analysis with Leigh Melbourne, Associate – Institutional Investment Services, said based on current activity, 2011 is likely to surpass the unprecedented sales volume recorded in 2010.
“At the moment we are already seeing an average of $100 million worth of sales per month,” he said.
“We aren’t yet even close to the second half of the year, when the majority of sales typically take place.
“2010 saw an unprecedented sales volume of over $1.7 billion in the Melbourne CBD.
“From what both buyers and owners are saying and doing, 2011 transactions will likely pass this amount.”
The largest sale in Melbourne CBD year to date was 595 Collins Street, which sold for $130 million by an Investa-controlled trust to Korea’s National Pension Service, with Investa retaining a 10% interest.
The lowest yield and highest capital value achieved so far this year was in the sale of 990 La Trobe Street at 6.8% and $6,717/sq m respectively.
“Yields in Melbourne’s CBD are trending down faster and to a greater degree than we anticipated at the start of the year,” Mr Rathgeber said.
Mr Rathgeber said the buyer profile is currently fairly evenly balanced between local and offshore buyers in the five sales recorded for the year to date.
Two offshore groups, KNPS & CIMB were represented in the deals to date, purchasing 595 Collins St, Melbourne and 469 LaTrobe St,Melbourne, respectively.
“While 2009 and 2010 saw offshore investors in Melbourne restricted to major passive assets with 10-plus year lease expiries and strong environmental credentials, 595 Collins Street, 469 La Trobe Street and other pending transactions indicate a distinctive swing by offshore investors towards core plus investments,” Mr Rathgeber said.
Challenger Diversified has been the only listed REIT to purchase property in Melbourne CBD this year.
“Listed REITs are underweight to Melbourne, but in the short term they are focused on reducing the gap between their share price and net tangible assets to allow them to acquire direct property,” Mr Rathgeber said .
“The only buyer category missing that is yet to buy in this cycle is wholesale funds,” Mr Rathgeber said.
“However, pent up demand and forthcoming supply should see a high weighting of sales to wholesale funds going forward.”
The further two sales were made to one private investor (Suleman Family) and one direct super fund (SA Motor Accident Commission).
Other current sales activity in Melbourne CBD includes 399 Lonsdale Street, which is currently in due diligence for a reported $40 million and 85 Spring Street which is currently on the market in an expressions of interest campaign, closing 19 May.
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