The one bright spot was the hotel sector, which posted an increase in activity and saw a record-breaking deal in Sydney – the Waldorf Astoria sale to billionaire couple Nicole and Andrew Forrest.
The global head of real assets research at MSCI, David Green-Morgan, said despite the hotel volume being dominated by one large purchase in Sydney, the positive sentiment around the sector following the reopening of borders and the economy continues.
On a sector basis, office sale volumes fell 71 per cent, with only a handful of properties trading for more than $100 million.
The biggest office sale was Charter Hall’s settlement of the ATO headquarters in Canberra for $290 million.
The biggest was Charter Hall’s settlement of the ATO headquarters in Canberra for $290 million. Yields continued to expand, with CBD office yields increasing for a sixth consecutive quarter to hit 5.5 per cent.
The report said yield expansion is now coming through in underlying valuations as the office sector recorded negative capital growth in The Property Council of Australia/MSCI Australia Annual Property Index.
Even the booming industrial property sector took a breather in the past three months, with the volume of deal only reaching $1.1 billion, an 82 per cent decline on the same time last year. Yields for warehouses moved out to 5 per cent.
In Melbourne, deals were noticeable for their absence, while Sydney was home to the five largest industrial deals of the first quarter; the largest being Goodman Group’s acquisition of 2-8 Lanceley Place for $95 million.
Martin-Henry said retail sales dwindled to $1.5 billion and yields for most retail subtypes expanded further. Large format retail yields, which had sharply compressed to a low of 5.5 per cent in the first quarter of 2022, have moved up to 5.8 per cent.
But the burgeoning build-to rent sector is a bright spot for lenders, according to the latest Lender Sentiment Survey, by CBRE.
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CBRE Research tapped a mix of 31 local and international banks and non-bank lenders for its H1 survey of Australian commercial real estate lenders.
The majority expect lending costs to increase going forward. There was a moderate dip in the percentage of respondents expressing a desire to grow their commercial loan books – from 44 per cent in October last year to 32 per cent when this month’s results were calculated.
CBRE’s Pacific head of research Sameer Chopra said the top-line results showed that industrial remained the favoured asset class, with more than 80 per cent of the survey respondents expressing a preference to lend into that sector.
“The overall reduction in lending appetite was most prominent among non-banks, although the results show they are still interested in growing their BTR, residential-to-sell and industrial portfolios,” Chopra said.
“Tighter credit conditions are placing undue downward pressure on future supply, which could boost longer-term rent growth across all sectors.”
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