Investment sales soaring

Sales of big-ticket commercial properties more than quadrupled between the first and second quarters of this year, CB Richard Ellis research has found.

Investment sales of more than $20 million in the office, retail and industrial sectors reached $2.7 billion in the second quarter, a 432 per cent increase on the first quarter’s $638 million turnover.

And turnover for the 2010-2011 financial year reached $8.9 billion, 32 per cent higher than the previous financial year.

Melbourne dominated the market in the second quarter, continuing to enjoy the biggest single share of investment turnover with 41 per cent.

CBRE global research and consulting executive director Kevin Stanley said the turnover for this year’s first quarter – typically a quiet time – had been the lowest for almost 20 years. Queensland’s floods and cyclones, the Japanese and New Zealand earthquakes and “general global uncertainty” were partly to blame, Mr Stanley said.

Many mid-to-major transactions that had been in the pipeline since late last year were wrapped up in the second quarter, contributing to the spike in sales.

CBRE’s analysis found that across Australia in the second quarter:

THE office sector dominated sales, accounting for 52 per cent of turnover;
THE retail sector experienced improved sales, accounting for 40 per cent of turnover;
INDUSTRIAL sales were slightly below average at 8 per cent; and
FOREIGN investors continued to be major players, buying 37 per cent of properties by volume against a long-term average of 10 to 15 per cent.

CUT TO THE FRINGE Big businesses will need to look outside the CBD for office space over the next five years as rents soar, according to CB Richard Ellis.

The company predicts rents in city centres will grow by 12 to 24 per cent during the next three to five years. As vacancy levels fall, space with green credentials and large enough floorplates will also become less available.

With CBRE research showing comparable gross rents in CBD fringe suburbs average 32 per cent less than in the CBD, global research and consulting executive director Kevin Stanley said big businesses could be pushed to the fringe or forced to split operations between a CBD head office and city fringe premises for other functions.

“Looking back, the gap between CBD rents and the fringe markets never closes,” Mr Stanley said.

St Kilda Rd demonstrated a big gap, with its rents 35 per cent lower than in the CBD.

On the other hand, CBRE’s national survey found the smallest gap between CBD and city fringe office rents was in Southbank, where the gap between its rents and those in the CBD is 18 per cent.

Mr Stanley said that could be attributed to higher-quality buildings being constructed in Southbank in recent years.

OFFICE DEMAND PEAKS AT BOX HILL
Box Hill has recorded the lowest office vacancy rate in Australia, Colliers International research shows.

The suburb has a vacancy rate of just 1.38 per cent for its 150,000sq m of office space. Colliers Melbourne East director in charge Rob Joyes said demand in Box Hill had already led to rent increases of 10 to 15 per cent during the past year, with more rental growth expected.

Mr Joyes and colleague Peter Bremner recently sold the building at 18-20 Prospect St, Box Hill, for $8.1 million off market.

It was buyer Vantage Property Investment’s fifth Box Hill purchase.

Mr Joyes said sales of $5 million-plus office properties in the Melbourne metropolitan market had been slow compared with 2010. Ten such properties, or $80 million in total, had sold so far this year, compared with 25 ($340 million in total) during 2010.

Mr Joyes put the slower sales down to hesitancy around rising interest rates, barriers in accessing finance and a lack of quality listings.

RECENT SALES
Kliger Wood Real Estate’s Russell Meerkin, in conjunction with Kelly & Shiel, has sold at auction the double-storey brick building on 116sq m at 231 Lygon St, Carlton, for $1.9 million on behalf of a family that had owned it for more than 50 years. The building is leased to Intrepid Travel at $70,304 (plus GST) a year.

Axis Property’s Daniel Liberman has sold at auction a double-storey brick shop at 194 High St, Ashburton, for $1.7 million – another property that has not been on the market for more than 50 years. The shop, on a 200sq m site, is leased to Formal Wear of Melbourne at $50,400 (plus outgoings, except for building insurance).

Colliers International’s Nick Saunders and Cameron Hunter have sold a 120sq m vacant building at 15 Little Hyde St, Yarraville, for $252,000 to GA Richardson Building Contractors, which plans to occupy it. The property was sold under the hammer.