Sydney, 16 March 2014 – Sydney’s North Shore commercial property market is expected to rise further on the radar of property investors in 2014, with the region offering diverse investment options after stock shortages in 2013, rising CBD prices and increased levels of capital.
CBRE Director, Capital Markets, Institutional Investments, Simon Kasprowicz expects 2014 to be a robust year in terms of transactions, with the area recording strong levels of buyer enquiries as investors look for attractive opportunities in suburban markets.
“A shortfall of stock in 2013 created a bottleneck of capital towards the end of the year, which may translate into more activity from owners looking to divest their assets, capitalising on the strong demand increasing in 2014,” Mr Kasprowicz said.
“We expect to see further strong sales in 2014 on the back of some exceptional results in 2013 for A-Grade stock such as the transaction of Northpoint, 177 Pacific Highway and 168 Walker Street for $83.75 million in North Sydney.”
Mr Kasprowicz said the current shortage of stock at all levels and increased buyer interest has seen yields compress across the market.
“The continuation of strong but scarce sales towards the end of 2013, coupled with higher levels of interest from buyers both established and new, is providing owners the opportunity to exit the market and capitalise on yield compressions.”
Buyers are active across all price ranges, Mr Kasprowicz said, adding that the three distinct buyer groups were those looking for A-Grade assets with long Weighted Average Lease Expiries (WALEs) and strong covenants, value-add opportunities with some leasing risks and/or repositioning opportunities, and residential development or redevelopment opportunities.
He commented: “In particular, there is strong overseas interest in the residential and redevelopment market, with these groups looking to convert commercial property to residential – further adding to the increased demand for office assets through the reduction of available fringe office space.”
Demonstrating the increased demand for residential redevelopment opportunities in North Sydney is the recent sale of an office tower at 52 Alfred Street to developer Bridgehill for $80 million.
According to Mr Kasprowicz, current highs in CBD prices are also underpinning a shift in investment sentiment, with buyers changing their objectives in an attempt to reduce the competition and enter into a different investment class.
“This ultimately creates competition down the line,” Mr Kasprowicz explained.
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