Perth and Brisbane to be next hubs of commercial development after national sales investment decline: Jones Lang LaSalle

Perth and Brisbane will be the next hubs of commercial development activity between now and July next year, according to Jones Lang LaSalle, after commercial sales spending declined 13% nationally in the first six months of 2012. 

Jones Lang LaSalle analysis shows that Australian investment volumes for office, retail and industrial for the first half of the year (as at June 21) reached $4.6 billion, compared with $5.3 billion for the first half of 2011. 

Despite the 13% drop, John Talbot, managing director of the investment and advisory group at Jones Lang LaSalle, says investment volumes had held up well “despite the uncertain global environment”. 

“Office markets have proved resilient despite the caution amongst investors and occupiers.  Sales volumes recorded for the first half of this year have almost reached the volumes recorded in the first half of 2011,” he says. 

Office sales declined from $2.47 billion to $1.95 billion, with retail the strongest performer, recording higher volumes in the first half of this year compared with last. 

There were $2.07 billion of retail sales recorded in the first half of the year (as at June 21), up from $1.8 billion in the first half of 2011. 

This figure was helped by the Perron Group paying a post-GFC record in May of $690.4 million for a 50% ownership stake in three of Centro Retail Australia’s flagship regional shopping centres, with the transaction negotiated by JLL’s Simon Rooney.

“In terms of the outlook, the reduction in the cost of debt for well rated groups is an interesting dynamic.  It is now accretive for listed vehicles to buy office assets in Australia,” says Talbot. 

“For wholesale funds, the reduction in the cost of debt has lowered the weighted average cost of capital and makes property investment attractive. 

“One of the hurdles in the market is the lack of prime-grade stock. A development cycle would create a supply of product, however there is limited development activity. 

“The space market conditions point towards development activity in Brisbane and Perth over the next six to 12 months. We expect that this will create fund-through opportunities,” he says.