Commercial & Industrial Property News Update

Australia - 2012: The Rise Of The Syndicates

August 23, 2012

Property syndicates have emerged as the dominant player in Western Australia's commercial property market, said Knight Frank.

Western Australia's commercial property market this year saw the rise of property syndicates, which have emerged to dominate the market chasing yielding of 8% to 10%.

Year to date, more than 50% of all major commercial sales have been attributed to property syndicates, which, according to Knight Frank, are showing no signs of slowing down.

Knight Frank recently acted on behalf of Fortius Funds Management in the sale of 1 Adelaide Terrace to GDI Property Group. The purchase, valued at AUD 102.55 million, represents a yield of more than 10%, suggested GDI, which earlier this month launched the unlisted GDI No 36 Perth CBD Office Trust with a target to raise AUD 65 million in equity.

Sited adjacent to a 40 ha urban renewal project called Riverside that will extend Perth's CBD grid to the water's edge, 1 Adelaide Terrace is a Grade A office building that spans 19,825 sq m. The award-winning seven-storey building features large floor plates of 2,500 sq m to 3,000 sq m, and earlier this year was 95% occupied by five blue-chip tenants.

Other notable syndicator purchases include 255-267 St Georges, which sold for AUD 26.7 million, and 251 St Georges Terrace, which sold for AUD 61.3 million.

According to John Corbett, managing director at Knight Frank, syndicates have always been active in Perth's commercial property market. However, in 2012, they emerged as truly dominant players in both the commercial and industrial sectors.

Corbett noted that unlike individual developers and private investors who are constrained by a lack of funding, syndicates unite cashed-up small investors to secure larger properties.

"The market is working in the favour of syndicators like GDI and Primewest, who have established track records and have excellent data bases of potential investors," Corbett said.

"Many smaller investors are being frustrated by the lack of quality properties in the AUD 1 million to AUD 5 million range, so the option of being part of a larger purchase is quite appealing."

"At the same time the traditional competitors for the larger properties are being restricted by issues like flexibility and bank financing."

By joining up with a syndicate, smaller investors are achieving yields in the range of 8% to 9% through the acquisition of larger properties.

"It is still very much a buyers' market, and the syndicators are making hay while the sun shines," Corbett added.

"The large super funds and other investors will soon be getting more aggressive with their strategies, but for now the syndicators are cherry-picking the best deals."

Tags: Commercial real estate, Income properties

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