Savills Impacts Forecasts Outlook for 2022 Real Estate

The Australian Industrial & Logistics sector is expected to remain 2022’s dominant asset class; however, the office sector has proven to be resilient as capital values have sharpened in the last 12 months, a result of how Australia is handling the COVID-19 pandemic, which ultimately increased investor confidence in the office sector.

This year’s sale of Brisbane’s ‘Gold Tower’ at 10 Eagle Street for $285m highlights the continued investor confidence in core real estate investments across Australia. The sale was transacted by Savills and marks the largest office asset sale in the Brisbane CBD this financial year.

The performance of the office sector was further highlighted by the sale of a 33% interest in 1 Bligh Street, Sydney to Mercatus in their first direct property acquisition, a transaction also negotiated by Savills during the pandemic.

The demand for core office stock has continued into 2021 with Savills being appointed to sell a 50% share in 200 George Street Sydney. The campaign saw strong involvement from offshore investors who are optimistic in Australian office fundamentals and see relative global value in core office cap rates, in comparison to other developed cities.

With a significant spread between property yields and 10-year bonds, and the cost of debt being at historical low levels, an argument is presented for further cap rate compression for core, defensively positioned office assets now and in 2022.

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by Paul Craig, CEO of Savills Australia and New Zealand