The Australian commercial real estate market is set for a particularly active fourth quarter of 2015 with suggestions that up to $5 billion worth of office space, shopping malls and logistics centres are potentially up for sale. While some experts are suggesting this could indicate the top of the Australian commercial real estate market in the short term, the fact there are potential buyers out there at current levels could be seen as positive.
Even though the fourth quarter is historically a very active time for Australian commercial real estate many have been surprised by the amount of potential assets in the pipeline.
Who is selling Australian real estate?
There are a number of corporate sellers which include the likes of Charter Hall Group, JP Morgan, Brookfield and Valad Property Group. It seems that the expected sales have been prompted by strong prices over the last few months. The current low level of Australian base rates has also helped to fuel demand for both domestic and corporate real estate across Australia despite many “experts” caught trying to talk down the sector for some months.
It will be interesting to see how strong demand is for this flow of real estate towards the end of 2015. Indeed if there are a number of corporate entities “repositioning their assets” who exactly will be buying these commercial real estate investments?
Office assets in demand
Many experts have highlighted the recent Morgan Stanley /CIC office asset transfer as a turning point for the sector. The price received for these assets seems to have prompted others to take advantage of the “buoyant marketplace” and look to cash in their own office investments. Whether this expected deluge of office assets will prompt some buyers to take a step back remains to be seen. However, as we mentioned above, the current environment of relatively low debt levels and relatively low interest rates seems to be feeding ever-growing investor demand for Australian real estate.
Australian real estate market is extremely liquid
While it is unclear at this moment in time whether all of the reported assets will sell before the end of the year, experts predict there are at least $2.1 billion worth of transactions currently under negotiation. If these were to be finalised the total figure for commercial real estate for 2015 would reach a very impressive $6.6 billion. While just shy of the $7.4 billion record for 2014 this would still be an exceptionally good result especially in light of the current worldwide economic downturn.
Indeed the perceived strength of the Australian real estate market is all the more impressive when you consider the difficulties in China. Over the last decade China has become the number one investor in Australia across an array of different assets including real estate and mining. Indeed many believe that it was Chinese investment which shielded the Australian economy from the 2008 worldwide economic downturn. Over this period, astounding as it may seem, the Australian economy did not dip into recession.