CBRE ASIAN SERVICE DESK/ INTERVIEWED BY
EVA LI CBRE MARKETING COORDINATOR
2018 Commercial Real Estate has witnessed many ups and downs throughout the year, especially the influences coming from the big movements in Chinese investment market.We have interviewed CBRE Asian Service Desk senior members and collected their views over the future market.
EL: How does the current situation of Residential Market affect Commercial real estate? And positive influences, especially the Chinese buyers?
CZ: We have continued to find strong interest for commercial real estate from Asian investors. The slowdown of the residential market has meant there have been more investors who traditionally would have looked into residential property only, now considering commercial property investments.
The investment market for commercial assets with rental income, which banks are willing to fund, is selling with strong depth buyer interest. We have found many buyers who would have considered a residential development site 12-24 months ago are now shifting their interests to income producing assets.
EL: Chao, you are specialised in Development Site sector in CBRE team in the past years. What type of investors will invest in Development Site? What are they usually looking for in Development Site Investments?
CZ: The type of investors who are now looking to buy development sites are developers who have a track record of successful projects and understand the development process. These buyers see this as an opportune time to secure a site for their pipeline and understand that the fundamentals of population growth, low vacancy and low interest rates remain very strong in Melbourne.
Development sites with strong location fundamentals that have transport, retail and lifestyle amenity, in an affluent location, are attracting stronger interest than others. The stronger buyer profiles for the end sales are owner occupiers, downsizers and first home owners, which is the type of product that developers buying the residential sites are looking for.
EL: You have stayed in Commercial Real Estate Market for long. How are international buyers interpreting the commercial real estate market at the moment? Any positive signals you have observed over Chinese New Year?
KT: It is very clear in the market there remains a lot of buyer confidence for commercial property investments, especially those with strong fundamentals. Buyers are gaining confidence in the income producing investments with long term leases, especially those leased to ASX Listed national tenants. Furthermore, with the low 10-year bond rates, and potential for 2 more interest rate cuts in 2019 buyers are increasing their interest for bluechip commercial property as an alternative investment to money sitting in the bank.
EL: How well does Chinese Market know about Shopping centre investment, and what’s the selling point the investors are most interested in?
KT: Chinese buyers are becoming much more educated in shopping centre investments, as they are beginning to recognise the security of supermarket anchored tenants.The non-discretionary nature of the supermarket is protected from volatile changes in the economy, as no matter what people still need to eat and drink.Supermarkets such as Woolworths, Coles and IGA tend to be at locations very long periods of time and provide minimal headache for the owner.
EL: CBRE team successfully transacted IGA Ringwood East in the latest PPPA in March. What message did the team deliver to make the successful deal?
KT: IGA Ringwood East, was an investment that ticked a lot of boxes for investors with a 10-year Net Lease to IGA, with a good position being in the heart of Ringwood East opposite the train station. Furthermore, being on 2,100sqm of commercial 1 zoned gave the purchaser an opportunity in the future for further development and value add opportunities. Assets like this with value-add opportunities or upside, especially in good metropolitan locations are very attractive for investors at the moment.
EL: Any positive changes/movements/trends in Asian market that you have observed in the past few months?
JH: We probably have seen the news in the market place that there has been a reduction of the fresh Chinese capital coming from China, which was primarily due to Beijing’s crack down on getting money out. So, we have seen new Chinese bidders coming slightly slower. Having these been said, there still a lot of buyers active in the market that we have been dealing with, who are Chinese and have money moved to Australia. We are seeing some emerging capital from Vietnam, particularly Ho Chi Minh City and Hanoi, Singapore and Malaysia. These Southeast Asian countries actively bringing capital, including the places such as Jakarta, Indonesia. We have been dealing a few groups from there, who were actively looking to secure good commercial properties. The macroeconomic view on Australia as an investment destination is still very highly regarded, not just for Chinese but also many Southeast investors.
EL: What market message did the team deliver to make the smooth transaction for 755 Burke Road, Camberwell (3 days before the auction)? What Spice did you add to make it happen?
JH: We wanted to, on one hand, really focus with the buyer, educating them on the fundamentals of these core retail strips. So, the buyers of the 755 Burke Road, came from the back of Sports girl Sorrento and the Westpac Brighton campaign, and was active on both campaigns.So, the real point of educating the buyer was focusing on ‘what drives the retail streets’, ‘the strength of them’, the ‘proximity to highly affluent customers’, which are clearly communicated to the buyers. This is important because they still wanted to invest in the market for good assets in strong locations with good tenancies.
Our team’s communicating the strength of the streets and the tenant, therefore the buyer really saw the long-term value of the assets.
EL: How have the recent market movements (such as interest rate staying low, higher percentage in residential mortgage, elections) affect the commercial real estate? Any positive influences?
LM: Since beginning of 2018, there are a lot of factors have been changed in the market place for example tightening on lending, worse capital control measures from Chinese government; but on the positive side, we can see that the exchange rate between AUD TO CNY has been low compared to similar time in 2017. Interest rate still low here in Australia.
Overall the investment market is still strong, and we have witnessed in multiple situation that buyers still want to buy asset in a good location with future upside.Having a look at the recent highlight transactions, we have transacted Burwood one shopping centre (over 180m) and 509 st Kilda road (over 160m) to both Chinese background buyer which clearly indicated there are still interest from Chinese investors.
We expect to witness similar trend this year and we have seen enquiry level maintain very similar in 2019 compared to end of 2018.
EL: What’s behind the success of the renowned transaction, Market street, Box Hill in 2018? Will there be more similar deals soon?
LM: Market street Box Hill was defiantly a trophy retail strip asset, considering there were only 1 transacted in the strip in the past decade. 0% vacancy rate along the strip.Putting all the factor into consideration, asset with stable rental income, significate land value, potential for future value add like increase in rental or redevelopment will still attract a lot of buyer interest.