Commercial & Industrial Property News Update

Australia - August Saw Subdued Commercial Realty Market

September 12, 2012

The month was headlined by BB Retail Capital's AUD 43.8 million acquisition of the Mile End Homemaker Centre.

August saw a subdued commercial realty market, with only 17 deals recorded totalling AUD 55.8 million. In comparison, 20 sales in July accrued more than AUD 62 million.

Other than BB Retail Capital's AUD 43.8 million acquisition of the Mile End Homemaker Centre, none of the 16 other deals - which added a mere AUD 12 million collectively - were significant.

Marking Sydney-based BB Retail Capital's first foray into the Adelaide market, the 23,000 sq m Mile End centre deal was negotiated by CBRE and Savills. The transaction represents a soft yield of 10.2% on a fully leased basis.

Philip Rundle, state managing director at CBRE said that the market had overlooked the property's solid fundamentals - a "strong national tenancy mix and a huge land parcel within 3 km of the CBD".

"The yield to the purchaser is on the high side when looking at bulky goods centre sales over past years," he said.

"Whilst this asset class has generally traded at a discount to the food-based centres, the yield suggests to me the market is overpricing the risk in that sector," Rundle added.

Savills state managing director Rino Carpinelli said that offshore investors also showed interest in the property. "We marketed the property through our network of offices in Asia and we were able to get some interest out of Singapore," he said.

Office transactions suffered the greatest drop in the month, with just AUD 6.6 million worth of assets traded in six sales, compared with 11 deals in July with a combined worth of AUD 12.2 million.

The lull in sales was offset by a surge in leases in August. The number of leases signed rose to 52 from 31 in the previous month, resulting in over 10,000 sq m more space taken up in August than in July.

Office leases spiked in the month, recording 24 leases totalling over 15,000 sq m, up from 10 leases in July over less than 5,000 sq m.

Retail leasing figures were also up, rising from 12 leases across 1,840 sq m to 17 deals across 3,800 sq m.

Tags: Commercial real estate, Industrial properties, Warehouse for sale

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