The JLL
Victorian Office Investments team's latest edition of The Office Perspective is now out!
Please contact me on 0415 767 915 / [email protected]
or any member of the JLL team if you would like to receive our more detailed weekly updates via email each Monday morning.
- JLL Research – Melbourne CBD & Metro Office Commentary Reports
- Asia Pacific Capital Tracker Q2 2024 (Are investors valuing rental growth or waiting for more office repricing? & APAC Volumes show YoY growth for the third consecutive quarter in Q2)
JLL’s market leading research team have now released their Q2 market commentaries on all of Australia’s established office precincts.
We are pleased to provide the below summary of these reports. Should you wish to receive copies of these reports, please contact any member of the JLL team.
JLL’s APAC team have prepared a comprehensive research report, detailing current buyer and vendor trends that they are seeing in APAC.?
Please see the link below to view/download the full report, as well as a summary below for your reference:
Are investors valuing rental growth or waiting for more office repricing?
- While office investment remains challenging for many global investors, APAC is seeing a larger share of total transactional activity being accounted for by office assets than North America and Europe (almost 40% in Q2 2024).
- We are also seeing the number of bids for office assets improve across the region.?Examining our propriety underbidder data in more detail, it seems like many of the groups who are bidding but not winning maybe under-estimating the role of rental growth in driving future returns.
- JLL has received over 50 bids for assets we have sold over USD 300mn in 2024, covering USD 1.6bn in transactions.?From our analysis it appears that those groups missing out are placing greater importance on yield compression over a 10-year hold period, whereas those groups who are successful are factoring in higher rental growth.
- Looking across the six cities where we have done the biggest deals, only Sydney and Brisbane are showing a slower rate of rental growth for the next five years compared to the previous five years, but still at over 15%.?Entering into a new era of investment, it is likely that rental growth will play a larger part in driving returns than consistent yield compression which was the hallmark of the post- GFC period.
- Repricing across the region has also not been as aggressive as we have seen in other office markets globally, on a capital value basis only Sydney is below 2019 pricing.?Even in a more normalised interest rate environment the prospect of returns being driven primarily from yield compression will be limited.?Value growth is likely to come from building specific rental growth, making asset selection even more crucial to performance.
APAC Volumes show YoY growth for the third consecutive quarter in Q2
- Asia Pacific investment volumes registered USD 27.3bn in Q2 (H1: USD 57.5bn), gaining 2% year-on-year, representing a 7% increase in H1 2024 compared to the same period a year ago. Office remained the most active sector, while retail and hotels continued to record volume growth from a year ago.
- Japan was again the most active market with USD 5.8bn in Q2 trades (H1: USD 17.3bn) marking an 8% increase in H1. Overseas investors favoured hotels amid tourist arrivals. Domestic developers bought Tokyo CBD assets for redevelopment.
- South Korea garnered USD 3.5bn in Q2 (H1: USD 7.8bn), declining 5% in H1. Domestic AMCs strived to partner with strategic investors aiming to acquire assets for owner occupation amid slim liquidity in the market.
- Singapore recorded USD 1.9bn in Q2 (H1: USD 3.8bn), improving 31% YoY (H1: +13%). Occupiers and family offices actively seeking investment opportunities. Strata sales dominated office transactions.
- Australia registered USD 5.4bn in Q2 (H1: USD 8.4bn), growing 73% YoY (H1: +23%). Foreign investors made large acquisitions across the office and industrial sectors, while domestic REITs remained active sellers.
- China volumes were USD 4.9bn in Q2 (H1: USD 10.5bn), rising 5% YoY (H1: -9%). Domestic end-users acquiring office for occupancy. Private wealth investors attracted to hotels for their stable performance. Opportunistic investors targeting foreclosed assets
- Hong Kong volumes reached USD 1bn in Q2 (H1: USD 1.8bn), up 40% YoY (H1:?????? -24%). The growth was mainly driven by a minority stake sale in a premium CBD office building by a local developer.
- India recorded USD 1.2bn in Q2 (H1: USD 1.6bn), a 16% YoY decline (H1: +12%). Domestic and international institutional investors were mainly interested in office assets in major cities.
We hope you have enjoyed this edition of The Office Perspective. Please reach out to our specialised team if there is anything we can assist you with.
Tim Carr - JLL Victorian Office Investments
