Offshore investors eye CBD

WITH Sydney and Melbourne office tower prices at record highs more offshore investors are expected to make their presence felt in the Brisbane CBD this year.

Offshore investors are expected to make their presence felt in the Brisbane CBD this year.

OFFSHORE investors last year overtook Australian buyers in the Brisbane CBD for the first time in a decade and overseas interest is expected to continue in 2018.

An early test of the offshore interest this year will be six office towers worth about $450 million – owned by US private equity giant Blackstone and local private investor Peter Harburg – that have been put on the market.

Savills QLD managing director Anthony Ott said Brisbane was on the offshore investment radar, especially buyers from Asia.

“The strength of the Sydney and Melbourne office markets at a tenancy level has driven yields to historic lows and as a result Brisbane is proving to be an attractive alternative for investors seeking higher yields in the current ‘low interest rate’ environment,” he said.

“A capital value spread of about $10,000/sq m between Sydney and Brisbane is the highest historically.

“As a result, we expect to see strong ongoing interest for Brisbane assets from offshore capital, and in anticipation of improving tenant demand, many of these groups are also happy to invest higher up the risk curve.”

According to Colliers International research, offshore capital dominated 2017 transactions, representing 61 per cent or $891 million of the total $1.47 billion worth of office sales, overtaking locals for the first time in 10 years.

In the largest office deal of 2017, Charter Hall, on behalf of a Singaporean sovereign wealth fund, paid $370 million for Santos Place, while in other deals, Blackstone acquired a 50 per cent stake in 400 George St, and Deutsche Bank bought 120 Edward St and 180 Queen St.

Colliers international’s research manager Helen Swanson said she anticipated offshore interest in Brisbane CBD to continue to expand.

“2018 is likely to see an increase in transaction volumes as investors grab the opportunity to benefit from over $12 billion of major ‘city-shaping’ projects,” Ms Swanson said.

“New-generation prime-grade office assets are very tightly held in the Brisbane CBD and are rarely traded.”

Premium-grade office yields for Brisbane assets currently sit at 5.25 per cent to 5.75 per cent, and A-grade office yields 5.75 per cent to 6.25 per cent.

Colliers Capital Markets national director Tom Barr said the sale of Santos Place was the

first highly competitive market test for Brisbane’s prime-grade pricing benchmarks since the sale of Waterfront Place in 2015.

“Investment demand from both offshore and domestic capital remains very strong,” he said.

“We anticipate that the majority of investment supply in 2018 will be secondary-grade stock, which has been largely stabilised, as investors with core strategies look to take advantage of current market conditions and selectively trade out of positions.”