Private investors are capitalising on repricing in the office market and dominating commercial office transactions in 2024 to date, as institutional investors largely remain on the sidelines, according to leading agency Savills Australia’s latest Spotlight National Office Briefing.
Reduced competition from institutional investors is also creating ideal conditions for private investors to dominate the market. NSW leads private investor activity amongst the states, representing an overwhelming 61% of office acquisitions in Q1.
Savills says the most significant driver of deal activity in Q1 across the major capitals was the acquisition of secondary office assets for repurposing. 82 Sussex Street, Sydney sold for $29 million to Sugolena Pty Ltd with plans for a mixed-use redevelopment. 499-501 Kent Street, Sydney was snapped up by Icon Oceania for $66 million and is set for conversion into a luxury hotel.
“These emerging trends of asset repositioning and countercyclical investment strategies in Australia’s commercial property sector reflect global trends being played out in capital markets around the world,” said Chris Naughtin, National Director – Capital Markets Research at Savills Australia.
Naughtin noted that the ANREV Investment Intentions Survey 2024 shows investors globally, and particularly in the Asia-Pacific region, are moving away from relatively conservative core investment strategies in favour of higher risk-return value add and opportunistic investment styles.
Opportunistic investors take counter-cyclical approach to market
Australia’s commercial office market was off to a slow start in Q1 2024 with office investment volumes down 56% compared to a year ago. However, activity is expected to pick up for the remainder of 2024 reflecting ongoing repricing and investors increasing taking a counter-cyclical approach.