Buyer pool improves for prime assets

By Richard Evans

Adelaide’s fringe and metropolitan office markets are set for an uplift in demand from tenants and investors, claims a new research finding.

Kate Gray, Colliers International’s Associate Director of Research, said private investors and owner occupiers were active in metropolitan markets where assets tended to fall in a lower price bracket below $5million.

“Some of the inner metro areas and the city fringe in particular have seen changes to planning laws over the last two years which allow for greater building heights and more mixed use developments,” Ms Gray said. “These changes are aimed at improving infill in the inner suburbs with limited impact on heritage areas which tend to exist in the inner city."

There has not yet been any major withdrawals of office space from the fringe or metro markets for conversion to residential use, she said, but expects these conversions will begin to occur as buildings become more obsolete.

There has been several sales of development sites within the metro markets which are likely to be developed as higher density residential apartments, she said.

“The $5million investment market has seen strong activity during the first half of 2015, with sales this year already surpassing the total value from 2014,” she said.

Three major assets have exchanged during 2015, with a total sales value of $20.4million. Third Ave in Mawson Lakes was sold by Renewal SA for $9million, King William St in Kent Town went for $6,150,000 and 127 Greenhill Rd, Unley, sold for $5.25million, all to undisclosed buyers.

Oliver Totani, Colliers International Manager – Metro Markets, said this was reflective of increased interest in commercial property as an asset class over the last 12 months.

Adelaide’s metropolitan markets, with their good amenity, parking and close access to the CBD, stand to benefit,” he said.

In the current lower growth environment, investors are finding returns in the share market and cash are poor and therefore are turning to property as an alternative investment class. This has seen the buyer pool for investment grade assets continue to improve, with interest for larger prime grade assets with strong lease covenants remaining in strong demand.

Private investors and owner-occupiers continue to drive investment in the sub-$5million sector and tend to be a strong buyer type for fringe and metro office assets. All of the assets which have exchanged this year were purchased by private investors.

Prime stock is still in short supply, and demand is still strong from both tenants and investors for these assets,” Mr Totani said.

With the metro office markets having relatively low vacancy and limited supply, the fundamentals for these markets remained positive in the short to medium term, concluded Ms Gray.

- Article courtesy The Advertiser, September 29, 2015

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