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Commercial property: Big deals keep on rolling

Melbourne’s Jam Factory on Chapel Street, bought by Newmark for $165 million. Photo: unknownThe commercial property market is poised for another bumper year as increasing business confidence, the falling n dollar and historically low interest rates drive investors.
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Transactions across and all sectors is expected to reach $35 billion in 2015, with local purchasers accounting for half of the investment.

Shopping centres, office towers, development sites and industrial assets have all recorded bumper results during the year.

Colliers International John Marasco said: “It’s been a perfect storm of record low interest rates, the falling dollar and the affordability of Melbourne when you benchmark it against not just Sydney but also Singapore and Shanghai.

“There’s been a real balance of local and offshore groups too.”

Some of the bigger deals have been done just this week. Private equity giant Blackstone is paying  $675 million for half of Southern Cross towers on Bourke and Exhibition streets. Earlier, China Investment Corporation paid $2.45 billion for the Investa Property Trust portfolio on a yield of 4.9 per cent, and Lang Walker is hoping to better that  with the sale of Docklands’ Collins Square project.

In retail, GPT is about to sell the 57,116-square-metre Dandenong Plaza to Armada, and earlier  Challenger sold the Jam Factory to Newmark for $165 million. The Well in Camberwell fetched $72.5million on a 6.06 per cent yield.

JLL head of retail Simon Rooney said competition between domestic and offshore buyers  would continue to be fierce next year.

“The offshore buyers love because it’s very transparent. They’re looking for low-volatile high-quality assets,”  he said. “We’re at a strong point in the cycle. There’s an opportunity for larger owners to sell assets or partial investments to rebalance their portfolios and use the money to refurbish existing assets.”

There’s been plenty of revamps already. QIC increased the size of the Eastland shopping centre in Ringwood by 55 per cent in a $655million expansion that provided space for a host of new retailers, including  Uniqlo.

The Scentre Group’s Knox is having a $450 million 46,000-square-metre revamp that will result in a 188,500-square-metre centre. That  would nudge Chadstone Shopping Centre’s 190,000 square metres if Chadstone was not also  expanding.

A $580 million redevelopment that adds 34,000 square  metres to its floor space will maintains its status as ‘s biggest mall but will add extras such as a hotel and a 10-storey office tower.

The push to  ever-denser retail and residential projects in the suburbs is likely to have an impact on industrial development. Savills national head of research, Tony Crabb, said the growing population would create demand “for more logistics, more storage space and more places for manufacturing”.

Mr Crabb, who is also industrial spokesman for the n Property Institute, said industrial businesses have already been displaced from the inner suburbs and would be pushed out further.

The GIC portfolio, purchased by Ascendas for $1.07 billion during the year, attracted a premium because of the size of its land offering.

“This was a sizeable premium paid for the scale of portfolio – for being able to purchase a rare $1billion-sized land offering.”

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