Investment into Australian commercial real estate has had a strong start to the year, recording the highest ever Q1 volume of $6.5b. It surpassed the previous Q1 record of $6.3b in 2018, following the largest quarter on record in Q4 2021.
Rolling annual transaction volume totalled $53.9b, also the strongest annual figure in Cushman & Wakefield’s Investment Marketbeat series, exceeding the previous record of $51.9b set in Q4 2021.
Investment in Q1, 2022 was led by the office market with a total transaction volume of $2.7b. Contributing to the total were Dexus approving the development of Atlassian’s $1.4b headquarters at 8-10 Lee Street, where they will reportedly take a two-thirds stake for $840m. Other significant transactions include CapitaLand Integrated Trust, acquiring 101 Miller Street for $422m.
Simon Fenn, Managing Director, Australia and New Zealand, Cushman & Wakefield, said: “CRE investment continues to break records, with interest in office assets leading the deal tables so far in 2022. Increasing demand for the growing pipeline of on-market office assets is a clear sign of long-term investor confidence.”
Retail recorded its second strongest Q1 with transaction volume of $1.4b. The quarter was second only to Q1 2013 with a volume of $1.6b. Major transactions included Sentinel Property Group’s purchase of Casuarina Square in the Northern Territory from GPT for $397m.
Compared to recent quarters, investment volume for the industrial sector was relatively subdued at $972m. However, that was still the third strongest Q1 volume in Cushman & Wakefield’s records as the tailwinds of online sales and supply chain transformation continue to drive demand.
Significant transactions included Dexus’ acquisition of the four property McPhee’s Super Core Logistics portfolio for $186m and ESR’s purchase of 286 Horsley Drive in Sydney’s west for $152m.
The purchase of mixed-use precinct Parliament Square for $338m by Spirit Super, drove ‘Other’ CRE to $1.39b, the second highest sector in Q1. ‘Other’ CRE, includes mixed use, hotels, pubs, service stations, student accommodation, serviced apartments, self-storage, aged, health, and childcare, where the price is greater than $5m.
Purchase transaction volume by offshore investors was relatively subdued, accounting for just 26% of total volume compared to the long-run average of 36%. Singapore was the top source of offshore capital with four transactions totalling $725m, followed by the US with $189m and Hong Kong with $152m.
John Sears, Head of Research Australia and New Zealand, Cushman & Wakefield, said: “Following a record Q1, 2022 is looking increasingly positive for Australian commercial real estate markets, as local investments continue to provide attractive returns compared to many fixed-interest and overseas investments.”