By David Green-Morgan on September 12th, 2019
Benjamin Chow provided data analysis for this article.
While the Australian property market has long been regarded as the most transparent location within Asia Pacific and one of the most transparent globally, there is one element of the market that has remained rather opaque. Many of the largest institutional investment assets in Australia have multiple owners, in contrast to what you find in most other developed markets around the world.
This multiple ownership model in Australia has been around for several decades and was initially driven by high prices. The prospect of shared ownership was preferred as a way to spread risk and avoid having a significant percentage of one’s portfolio locked up in one very large asset. It became so popular that approximately half of all the major office assets in Sydney and a quarter of those in Melbourne have multiple owners.
However, the tide may be turning as the investment opportunities in Australian office markets grow and the amount of capital dedicated to property investment increases, from both domestic and overseas capital groups. Two of Australia’s landmark transactions so far in 2019 have involved buildings owned by multiple investors passing into single ownership.
In April, Dexus purchased their outstanding 50% stake in Sydney’s MLC center from GPT in an AU$800 million (US$570 million) deal. The transaction will provide Dexus with full control to progress with an upgrading of the retail component. In Melbourne, the unlisted GPT Wholesale Office Fund exercised its preemptive right to buy the remaining stake in 2 Southbank Boulevard for AU$325 million from Frasers Property Australia.
With over AU$5.7 billion already recorded and the potential for other multi-owned buildings to transact, 2019 could well prove to be a record year. The previous peak of AU$6.5 billion was in 2017 when several major shopping centers in Australia moved into single ownership.
The office market is seeing a particular focus due to increased uncertainty in the retail sector since 2017, and a lack of suitable investment opportunities in the industrial and institutional residential sectors. We can expect this investment trend to continue while performance across the office market remains strong, with low vacancy rates and rental growth.
This trend was first noted in the Q2 2019 edition of Asia Pacific Capital Trends. To learn more about how to receive this Real Capital Analytics report, and reports for commercial real estate trends across the globe, please contact us.
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