Commercial real estate sales plummeted across Australia during the first nine months of 2020, according to findings from Colliers International.
The Colliers International Capital Markets 2021 report shows that office sales were down 75 per cent, retail real estate sales crashed 29 per cent, and the entire sector was down 58 per cent, with $10.96 billion trading over the first three quarters of 2020.
All five states recorded drops, with QLD (-67 per cent) and NSW (-66 per cent) the worst hit.
John Marasco, Managing Director, Capital Markets at Colliers International said this is not neccessary a bad sign.
“The assets that have traded have shown minimal movement on yield metrics, reflecting significant pent-up capital seeking placement and the lack of stock available for sale, which bodes well for the sector.
“We are seeing the flight to quality thematic is beginning to play out as investors chase strong covenanted assets with long WALEs.
“Asset gearing is much lower than during the GFC, these investors have the ability to ride through the initial pandemic period.”
The hotel sector suffered greatly, with just $408 million in transactions recorded, most of these taking place in the first quarter of the year, pre-COVID.
Colliers note, that with a historical average of $1.6 billion, these hotel transactions are the lowest figures since 1999.
Industrial property, however, was up 5.6 per cent year-on-year, with $3.57b of industrial real estate sales. This can be attributed to the rise of e-commerce during the lockdown, with warehouse space at a premium.
This rise was hampered by a lack of available property for sale, with Colliers International estimating that investors are looking to inject $26 billion into the industrial property sector.
“Given that just $3.57 billion has traded so far in 2020, it highlights the significant mismatch between supply and demand and the significant volume of unsatisfied capital looking to be placed,” said Gavin Bishop, head of industrial capital markets at Colliers International.
“As a result of this, we expect that additional assets will be brought to market in 2021 as groups look to capitalise on the continued strength of the industrial and logistics market,” he said.
Even without this additional capital, the AFR reports that during the September quarter, industrial property sales were higher than office sales – the first time industrial has outperformed office since quarter one of 2011.
This follows a record year in 2019 for office space, with $25 billion
of sales in both metro and CBD office markets.
2020 office sales to Q3 sit at $4.3 billon.