Adelaide’s office investment reaches record heights in 2017

Office investment volumes in the Adelaide CBD reached $475 million in 2017, almost 26 percent more than the 10-year average of $378 million, according to Savills Australia’s latest Quarter Time National Office research report.

The figure follows the record 2016 year-end result, when the total value of major office sales for more than $5 million reached its highest level in the past decade.

Savills Associate Director for Research & Consultancy, Katy Dean, said the city’s relatively active investment market was underpinned by investors chasing prime assets.

“Despite some softening in the leasing market during the past year, the high value of major office sales in 2017 is the result of several significant asset sales,” she said.

The sales include 45 Pirie Street for $105 million, Citi Centre for $42 million, and the Motor Accident Commission portfolio sale, which included 99 Gawler Place and 121 King William Street.

Savills Adelaide’s Managing Director, Rino Carpinelli, said recent sale volumes had been buoyed by the announcement that Dexus had exchanged contracts to sell ANZ House for $202.3 million.

“The quality of assets that has been presented to the Adelaide market in the past 12 months has been high, which has influenced the strong sales volume achieved,” he said.

“This bodes well for institutions and off-shore groups looking at comparable assets in other markets that are sitting on much lower yield ranges.”

Ms Dean went on to say that offshore investors had “dominated” the city’s recent investment activity.

“The report shows that offshore groups accounted for almost 84 percent of major office investment acquisitions by value in Adelaide last year,” she said.

“This is well above the average activity for foreign investment, with foreign investors accounting for about 30 per cent of major office sales annually in Adelaide during the past 10 years.”

Savills Adelaide’s Director for Capital Transactions, Peter Isaksson, confirmed that Adelaide was growing increasingly more attractive to Asia-based investors, most notably for its price point and upside potential.

“Adelaide market prime yields are still seen as a drawcard against assets on the eastern seaboard and overseas markets, a promising outlook for investors seeking to deploy capital under a counter-cyclical strategy,” he said.

In a promising forecast for transactional volumes, sales campaigns for office buildings at 77 Grenfell Street and 80 Grenfell Street were conducted at the end of last year, while Savills Adelaide is bringing the Commonwealth Bank tower at 100 King William Street to market in the second quarter of 2018.

“This will be a real litmus test for the Adelaide office market,” Mr Isaksson said.