Market expected to hit $28 billion in full-year sales volumes
The commercial property market gained momentum in the third quarter, with offshore investors, domestic institutions, and private capital as the primary drivers.
According to real estate agency JLL, office, retail, and industrial transactions totalled $6.2 billion during the period, a 40% increase compared to the same quarter in 2023. The industrial sector led with $2.2 billion in sales, followed by offices at $2.1 billion and retail at $1.9 billion.
Foreign investors played a significant role in the office sector’s rebound, accounting for two of the top three office deals in the third quarter. This included German firm Deka’s pending acquisition of 333 George Street in Sydney for $395 million and Hong Kong-based PAG’s purchase of 367 Collins Street in Melbourne for $315 million.
JLL reported robust performance in the industrial sector, with a 66% rise in sales to $8.3 billion in the first nine months of 2024, compared to $5 billion in the same period in 2023. Retail transactions also increased, with sales up 12% to $4.3 billion from $3.9 billion.
“Momentum is clearly building across commercial property sectors, and the office sector has been a major beneficiary,” Luke Billiau (pictured above left), head of capital markets Australia at JLL, was quoted as saying in a report by The Australian. “As we expected to see at the beginning of 2024, this reflects a higher conviction in the market and greater clarity with pricing.
“We believe the market is on track to record around $28 billion for full year sales volumes, based on the activity in the first nine months and with the fourth quarter traditionally the strongest sales quarter. This would see the full year volumes round out just below the 10-year average of $31 billion and signals the market is rebounding.”
Billiau also pointed to the peak in the interest rate cycle and a bottoming of property valuations as key factors driving the recovery.
“While we’re close to the trough in valuations, the 50-basis-point cut by the Federal Reserve is a positive step in the right direction that instils more confidence into real estate investors’ decision-making, and adds to a number of other countries which have also commenced the monetary policy easing cycle.”
He added that while Australia’s recovery may lag behind other global markets, buyers are already active, with expectations of further rate cuts by the Reserve Bank of Australia.
Andrew Quillfeldt (pictured above right), head of capital markets research at JLL, highlighted that institutions were managing their portfolios conservatively through asset sales, rebalancing, or using external capital.
“The top five transactions by value this year have been dominated by superannuation funds and offshore buyers,” he said, noting that large transactions were becoming more common, with 12 deals exceeding $300 million year-to-date, compared to eight in the same period last year.
Notable deals in the third quarter included the $600 million acquisition of Melbourne’s Austrak Business Park by Aware Super and Barings, while on the residential front, Billbergia Group acquired Han’s Group’s 338 Pitt Street development site in Sydney for approximately $500 million.
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