2016 CRE auction clearance rates fall dramatically as investors shy away from vacant properties --
Canberra, 27 February 2017 – According to Colliers International research, 2016 saw Canberra commercial property clearance rates fall by 11 per cent, driven down mainly by plummeting clearance rates for vacant commercial properties. 2017 is expected to see similar market conditions to remain with tenanted investments and development sites being the most favourable asset classes.
Clearance rates dropped to 66 per cent last year, coming off the back of a strong performance in 2015 which saw auction clearance rates hit 77 per cent. 2015’s high clearance rate was driven by a near perfect clearance rate of development sites, therefore a small correction was expected.
As investors chase secure returns in the small to medium commercial market, vacant properties have become increasingly unpopular driving down the overall clearance rate for the year. The 2016 clearance rate for vacant commercial properties was an extremely low 29 per cent.
Conversely, tenanted investment properties and development sites saw strong appetite with clearance rates of 68 per cent and 78 per cent respectively.
Auction proved to be an extremely popular method of disposal for Canberra vendors in 2016 with a total of 47 properties being taken to auctions and an average sale price of $6.4 million.
Properties and development sites sub $10 million were most prevalent. Only four properties above $10 million sold at auction last year and all were residential development sites auctioned on behalf of the ACT Government’s Land Development Agency (LDA).
The LDA was the largest net seller at auction for the second year in a row, with more than $149 million of land being sold. The LDA’s 2017 forecast land release schedule indicates this is a trend that is not likely to change in the near future.
Dominic Aungles, Valuer and Analyst at Colliers International said, “2017 market dynamics are already looking positive with five LDA development sites selling at auction last week for a total of $25.44 million and seven more commercial auctions scheduled to occur before end of the first quarter.
“The LDA is again expected to play a significant role in the ACT auction market, with a number of key development sites coming to market through 2017 and 2018.”
Mr Aungles expects investment properties under $5 million to remain popular this year.
“Mum and dad investors are likely to continue to seek out well-leased smaller assets, looking to gain stronger returns than typically afforded in the residential property market.
“Small commercial properties with secure, long-term leases are expected to be extremely popular as investors look for secure yields with rental growth. Whereas vacant properties, especially in areas such as Fyshwick, which currently have a soft leasing market, are expected to be exclusively the domain of owner-occupiers as investors look for more secure income streams in other markets”, said Mr Aungles.
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