Mirvac sale of office tower likely to trigger more overseas deals

“Whilst investors are feeling the administrative burden of the increased scrutiny around foreign investment into Australia, it is not enough to put them off investing into the country with Australia and Japan still being seen as the best bets for real estate investment in APAC”.

The main areas of interest are in the burgeoning build-to-rent (BTR) sector and data centres. The partners said that despite the negative sentiment around the office markets, the investors they met were positive, with a focus on high-quality office towers.

Tan said office is being seen as a countercyclical play but with more interest in the better quality and well-located properties. The environmental, social, and governance standards of the assets were also under the microscope for international investors.

“We got the impression from the people we met that sentiment is getting closer on pricing and that high-end offices are in demand,” Tan said.

It has been reported that the Canadian-based Brookfield has made some moves on a possible sale of its half stake in 388 George St in the Sydney CBD. Property agents have said the $1 billion tower, on the corner of King Street, is likely to ­attract local and offshore bids as its fully leased.

In Melbourne, Mirvac has said it is hoping to finalise the sale of its office tower at 367 Collins Street, known as the Optus Centre. It is also expected to attract international buyers.

Tan added the clients they met were also interested in BTR as a way to help ease the housing shortage crisis.

“The challenges of the current rental crisis and housing shortages have been well-recognised by government,” Tan said.

“A key question for investors is the role build-to-rent will play in addressing this issue, noting it has been part of the solution in many other countries.”

Tan said the current challenge is how to align the different layers of tax and regulatory requirements and planning approvals in a way that is conducive to returns “whilst also delivering fit-for-purpose buildings that will improve the housing stock.”

Vanessa Rader, head of research for Ray White, said given the uplift in sentiment regarding investment, “are we at the bottom of the market?”

“As we entered 2024 a wave of optimism returned to the commercial property market,” Rader said.

“Spurred on by the most recent inflation numbers, giving confidence that the next move in interest rates was down and perhaps sooner than first expected.”

She said with talk across the economy suggesting there could be two or three interest rate reductions this year, sentiment has lifted and enquiry levels across most markets have rebounded.

“Fundamentals for some asset classes are more difficult than others, such as office, which continues to be hampered by low occupancy and limited optimism surrounding rental appreciation in the short term,” Rader said.

“Industrial and its low vacancy and limited supply pipeline is keeping rents elevated, while the uptick in population may be fuelling an improvement in the retail and medical sectors.”

According to Rader, continued international and domestic tourism growth has seen room rates and occupancy grow which could signal a turnaround for the hotel market.

“An interesting time for 2024 as opportunistic funds seek out commercial property options which will likely slow yield growth and prop up capital value appreciation once again,” she said.

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