Underlying land values will continue to draw offshore purchaser in 2016
The continuing emergence of offshore buyers is expected to drive Melbourne’s metropolitan market in 2016 following a 60% increase in activity by this purchaser group last year.
According to Colliers International figures, 2015 was the largest year on record for investment in Melbourne’s metropolitan market – with 22.5% of properties being snapped up by offshore buyers. This is an increase of 60% on the previous year.
Just under $1.1billion in sales were recorded in 2015, compared to $1.07billion in 2014.
“Metropolitan sales cracked the $1billion mark for the second year in a row in 2015 with foreign buyers and private investors the most active,” Peter Bremner, Colliers International National Director of Investment Services, said.
“After two years in a row with total sales volumes exceeding $1billion each year, we expect 2016 to again match or exceed these levels as we continue to see local, national and international buyers aggressively competing in the Melbourne metro office market.
“We also expect to continue to see foreign buyers actively seeking office buildings situated on land rich sites or properties that have flexible zonings."
Mr Bremner said A Grade or newer assets would be keenly sought after in the $40million-plus price range, as institutions with specific metropolitan office market mandates sought to increase their quota of acquisitions.
“The relative stability of the metropolitan office market – with its sound fundamentals, lower incentives and rising rents across most market regions – will ensure this relative safe haven will continue to be keenly sought after in a low interest rate and unstable equities market environment,” he said.
“Owner-occupiers, especially in the education, health and medical industries, will continue to purchase office buildings for their own occupation, especially in the inner suburbs, whilst developers will also seek properties with zonings that allow for future multi-level residential or mixed use developments."
Mr Bremner said the growing number of offshore buyers active in the metropolitan market had secured a range of major assets in 2015, including Kaifu Investment at Brandon Office Park ($83million), Ouson Group at Greenwood Office Park ($66.5million) and FG Asset Management at Box Hill ATO ($156million).
Foreign buyers were particularly active in the Outer East region, accounting for 11 out of the 19 sales in the area with the majority of these properties being bought for future re-development purposes.
Another key theme seen in 2015 was the prevalence of the off-market deal, a trend Mr Bremner forecast would continue in the year to come. 30 of the 49 transactions that took place in 2015 occurred off-market, with only 19 being sold through an on-market sales campaign.
“A growing number of owners don’t necessarily want to put their properties on the market but are happy to accept strong off-market offers,” Mr Bremner said.