Whilst there has been a lot of noise regarding the residential property market, the commercial property sector is heading for a busy fourth quarter with many transactions expected in the key markets of Sydney and Melbourne. Average yields in the Sydney CBD fringe have fallen to below 4 per cent over the last six months with the Melbourne market also experiencing similar tightening of yields.
Across the listed funds, Dexus, Charter Hall and Mirvac are bidding for the largest real estate opportunity worth around $1.8B upon completion. The precinct located around 80 Collins Street, Melbourne includes multiple office towers, a 300-room hotel and a retail complex.
Other activity in the Melbourne market includes Charter Hall looking to acquire an office complex located at 737 Bourke Street which is being sold by Malaysian public services pension fund Kumpulan Wang Persaraan Diperbadankan (KWAP). The asset which is expected to be sold for $200M was bought in 2010 by KWAP for $113M. Key tenants include Lion and Opteon Property Group.
In the Sydney market, Dexus is expected to exercise pre-emptive rights to acquire GPT’s stake in the MLC centre for approximately $800M. This price represents a yield just below 5 per cent and falls in line with current book valuations.
Outside of the local fund managers, Canada’s Oxford Properties have been active with plans to divest 10 assets in the former Investa Office Fund. The assets located in ACT, QLD and NSW are valued at $1.8B or approximately 40 per cent of the portfolio.