Welcome to this special edition of Real Estate Insights, Mallesons' guide to the Australian real estate market for local, regional and global investors.
We are closely watching the events taking place in financial markets over last few days. It is not clear at this stage how these events will affect the Australian economy, which the IMF has said remains strong, despite the return of instability into the global markets. Some analysts are even predicting that Australia's relative strength may mean that it benefits from the turbulence. We will keep you informed about any developments.
Commercial office recovery
The availability of debt finance in Australia remains constrained, and the recovery in the commercial office market in Australia over the last financial year was driven by investments from sovereign wealth funds, superannuation funds and offshore investors.
Significant transactions include Stockland’s sale of a half interest in Waterfront Place in Brisbane to the Future Fund of Australia, as part of the implementation of Stockland’s “RRR” (residential, retail and retirement) strategy. SunSuper and REST have both acquired major CBD office assets recently, and Credit Suisse snapped up Grocon’s development of the ATO headquarters in Brisbane.
Retail investment strong
Despite concerns about the impact of online retailing, we have seen some landmark transactions involving large retail assets in Australia in the last 12 months.
The Future Fund of Australia and the Canada Pension Plan Investment Board each acquired a significant stake in a portfolio of regional shopping centres through the Colonial First State Retail Property Partnership, and Canada Pension Plan also acquired the Gandel Group’s half interest in Northland Shopping Centre in Melbourne. Colonial First State’s Retail Property Trust acquired 4 key assets of the Direct Factory Outlet portfolio, in the fund’s first serious foray into the discount retail outlet market. Stockland acquired the Point Cook Town Centre from Walker, and the Westfield Retail Trust IPO raised $3.1bn in volatile capital markets.
Residential driving growth
In the residential market, continued optimism and confidence in population growth predictions are driving some major greenfields projects, both in inner city areas and within new urban growth boundaries. A significant number of community clubs are taking advantage of this sentiment and are rationalising their real estate assets.
Racecourses are prime examples, as they are large tracts of land, often in established suburban areas. Golden Group is developing the land around the Belmont Racecourse, in the largest residential project currently underway in Western Australia. The Pakenham Racing Club also sold a significant parcel to a residential developer following a rezoning of its racecourse in outer suburban Melbourne.
Urban renewal projects
Whilst the limited availability of finance has impacted the real estate developments pipeline, increased business confidence and strong sentiment regarding rental yields suggest that growth may be imminent. Urban renewal projects in close proximity to central business districts, such as the Barangaroo waterfront project in Sydney, will continue to be a key feature.
In this edition we provide you what you need to know about the impact of the carbon scheme and PPSA reforms for the real estate industry in Australia. Our guide for regional and global investors acquiring Australian real estate will be launched soon. We hope you find this edition informative.