Australia sees 3rd best Q1 on record for the office sector
Commercial property has steamed into 2021, with total investment volume surpassing $4 billion in the first quarter alone.
Transaction volumes for Australian commercial real estate hit $4.5 billion in the first three months of 2021, up more than 50 per cent on last year’s Q1 result of $3 billion, new research from Cushman & Wakefield revealed.
While Q1 volumes marked the fifth strongest Q1 result in the company’s series, transaction volumes in the 12 months to March reached a slim $27.3 billion as a result of limited deals in Q2 and Q3 of 2020.
According to Cushman & Wakefield Australia and New Zealand head of research John Sears, Australia’s relative success in dealing with the pandemic, coupled with low interest rates, has boosted business and consumer sentiment, thus influencing the increase in investment activity and upping the appeal of commercial real estate.
The office sector accounted for nearly 60 per cent of transaction volume in Q1 with turnover of $2.6 billion.
Mr Sears flagged the latest office sector turnover as the third strongest Q1 in Cushman & Wakefield’s records, only beaten by the record $3.7 billion recorded in 2018 and $3.4 billion in 2019. However, it was still lower than the turnover in Q4 2020 at $5.7 billion.
In comparison, ‘other’ transaction volume stood at $804 million, while retail saw a relatively low $640 million gain – the lowest quarterly retail volume since 2012. Industrial turnover, meanwhile, recorded a turnover of $449 million.
Of the states and territories, NSW emerged as the leader, accounting for 56 per cent – or $2.5 billion – of overall commercial real estate transactions in Q1 2021.
Meanwhile, both Victoria and Queensland accounted for 12 per cent, totalling $552 million and $520 million, respectively.
According to Mr Sears, the NSW volume was lifted by office transactions, while ‘other’ transactions dominated in Queensland and Victoria, including retirement and childcare properties.
Demand from overseas
Looking ahead, the research head predicted a continuation of improving demand for commercial real estate on the back of the strong economic recovery, attractive returns and low interest rates.
However, the pace of international investment, which accounted for nearly 40 per cent of transaction volumes in Q1 2021, could start to slow down as travel restrictions are eased and an increased scrutiny by the Foreign Investment Review Board is implemented.
Ultimately, the strength of the level of investor interest largely depends on the continued containment of COVID-19 and the effective rollout and utilisation of a vaccine program, Mr Sears concluded.
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