The number of high value commercial property deals in Sydney is set to rise as investors chase dependable real estate assets in the city.
DLA Piper partner and head of real estate, Les Koltai, who recently advised on two high value sales in the Sydney CBD, believes strong domestic and overseas demand will prompt many more deals.
“There is a large body of investors seeking assets that are ripe for residential development, or commercial office space that can be converted to residential,” Koltai said.
Koltai and his DLA Piper team recently advised one of Australia’s largest real estate owners, Investa Property Group, on its acquisition of a 50% stake in the Piccadilly Centre in the Sydney CBD.
Investa will manage the office component of 133 Castlereagh Street, while the Stockland Group will manage the two storey shopping centre below.
The $194 million acquisition is Investa’s second major real estate deal this year, with DLA Piper having previously helped the group obtain a 50% share of Sydney’s “Glasshouse,” valued at over $300 million.
"The commercial real estate market in Sydney continues to feature prominently, with high-profile and complex deals being transacted in very short timeframes,” Koltai said.
Koltai explained that there is a sense of urgency to conclude deals as parties want to avoid “deal fatigue” and quickly take advantage of market opportunities that are being chased by large amounts of capital.
“The current focus is mainly on the East Coast, as the Perth market is going through challenges particularly in the area of office space,” Koltai added.
Chinese investors tended to show interest in convertible and multi-purpose properties, while domestic real estate companies were seeking to continue their current investment strategies, such as purchasing retail spaces, Koltai explained.
Clayton Utz partner Gary Best believes that foreign investment is playing a big role in the commercial real estate market’s performance.
“If the Australian dollar stays low, then clearly Australian property will be looked at quite positively from the overseas perspective,” Best said.
However, Best believes the commercial property market is not entirely positive.
“The commercial property market is tough at the moment from the leasing perspective because there is more supply than demand,” Best said.
With large new developments such as Barangaroo under construction, there is concern about how the market will be able to absorb the new space, Best explained.
Koltai, however, says the outlook overall looks positive for commercial real estate.
“The signs are good that there’s an active market for investors over the next 12 months,” he said.
