Retail stays firmest
THE retail market has been the strongest sector in the Australian property market and remains the focus of most interest, two new property profiles reveal.
Profile On Property 1993, released this month by Hooker Research, says the yield gap between office and retail property had narrowed in favour of retail - a shift it predicted would be permanent.
''Despite the slowdown in the overall economy, vacancy rates have been low in prime shopping centres and retail shopping centres are perceived to be slow risk and in limited supply,'' it says.
It predicts the retail market would stabilise in the next year following the portfolio shift into retail property by major investors: ''The next stage in the retail property cycle will be increased emphasis on the expansion and refurbishment of existing centres, a focus on financial performance and ensuring a market advantage against competitive centres.'' Jones Lang Wootton (JLW) Research's Australia and New Zealand Property Digest, also released this month, said levels of investment in the retail market were very high, especially compared with the office market, which remained weak, and the lower end of the industrial market which showed signs of improvement in the first quarter of 1993.
''Investment remains strong in the retail sector with over A$800 million (HK$4.24 billion) traded, the largest quarterly sales volume since at least 1988.
''Most sales and leasing activity occurred outside the central business district markets with regional centre rentals and yields continuing to improve,'' the report says.
In Sydney, where central business district retail yields remained at nine to 9.5 per cent, retail purchases for the quarter were dominated by the purchase of 50 per cent of two Westfield centres by Dutch pension fund Rodamco for A$290 million.
In Auckland, where prime yields had firmed to 9.5 to 12.25 per cent, demand for quality retail investments up to A$3 million exceed supply. One of the quarter's most significant sales, 100 Ponsonby Road at A$3.1 million, showed an initial yield of 13.7 per cent.
The outlook varied by sector.
''The commercial property market probably has the least positive outlook of all market sectors,'' it says, mainly because of the 21 per cent national average central business district office vacancy rate.
The Hooker Research profile says industrial property may be the active market of 1993-94.
''The market is supported by rising inventory levels and merchandise imports, increased investment in plant and equipment and the high level of activity in the residential construction sector as well as overall economic recovery.'' Industrial trends evident in the past 12 months were decisions by tenants to buy their own property and movements by tenants into better accommodation.
Current high vacancies meant rising demand in the next 12 to 18 months would not immediately translate into falling yields, but there would be signs of recovery as that surplus space was taken up.
JLW Research's digest said industrial demand during the March quarter was mixed. For instance, in Sydney interest was steady with several small sales of more than A$7 million recorded, while interest in Melbourne strengthened slightly with sites being bought for residential use, but in Perth industrial sales activity slowed, especially above A$1 million.
In Auckland, there was continued interest, with both prime and secondary yields firming - prime at 11-12.5 per cent and secondary at 12.5-15 per cent. In Wellington supply increased during the quarter, with the released of the Bank of New Zealand's portfolio tender which included six industrial properties.
Asian investors are continuing to play a major role in the Australasian property markets, with leading agents holding regular Asian exhibitions, particularly in Hongkong and Singapore.
In the 1990s, foreign investors, mostly Asian, have poured A$3.8 billion into the Australian east coast property market, according to JLW research.
Several key purchases this month involved Asian buyers. Asian investors have been snapping up apartments in Citistate Corp Ltd's luxury One Darling Harbour residential project in inner Sydney.
They bought most of the 92 of 215 apartments sold off the plan in three weeks, with agent Richard Ellis selling 21 at a recent three-day exhibition in Hongkong - seven for more than A$1 million.
The AMP Society sold Bank of New Zealand House, an office block in Sydney's inner-city George Street, to Singaporean interests for A$32.25 million.