Colliers Survey shows property portfolios set to grow in Pacific region

The recent

Colliers International

2014 Global Investor Sentiment Survey has shown a future rise in property investment volumes across Australia in the next year with 72 per cent of investors in the Pacific region planning to expand their property portfolios.

The survey sampled major institutional and private investors and these findings show a dramatic increase on last year when only 56 per cent of respondents indicated plans to up their investment portfolios.

John Marasco, Colliers International Managing Director of Capital Markets & Investment Services, said this was consistent with 2013 investment trends, with Australian-based investors becoming far more active.

Pacific investors were far less risk averse than many of the other regions surveyed with 64 per cent specified that they planned to take on more risk over the next 12 months.

The survey showed that investors are willing to take more risk due to the fact it is now cheaper to access capital locally, due to an easing of financial policy over the past 18 months.

“At present, we are seeing a widening gap between prime and secondary yields in the Pacific market as the majority of capital focuses on better grade stock,” Mr Marasco said.

“To access a wider range of opportunities, as well as higher yields, many local investors are looking to secondary properties.”

Major Australian institutions are believed to be aiming to target non-CBD office properties as a way to diversify their portfolios and target higher yielding assets.

Colliers International National Director of Research, Nerida Conisbee, said the majority of investors continued to invest locally.

75 per cent invest within their domestic market, 17 per cent within the Pacific region. Only 8 per cent primarily invest outside the Pacific region.

“These proportions are not expected to change over the next 12 months, with the Pacific being the primary focus for investment for 92 per cent of investors,” Ms Conisbee said.

“Investors in the Pacific overwhelmingly prefer to invest in eastern seaboard Australia.

“The global cities in which investors are most likely to invest are Sydney (55 per cent), followed by Melbourne (12 per cent) and Brisbane (4 per cent).”

CBD offices held the top spot as the preferred investment product among 57 per cent of Pacific investors.

“We’re seeing a much higher level of interest in offices this year than last, when only 28 per cent indicated that it was their preferred investment class,” Mr Marasco said.

The second most preferred investment class was 39 per cent of investors would invest in Industrial and Logistics while 37 per cent of investors intend on focusing their interest on shopping centres.

“This is consistent with global results, as well as investment volumes, in the region,” Mr Marasco said.

“There also continues to be strong interest in new development, which was the fourth most voted asset class”.

“In terms of investment capacity, the majority of Pacific investors (64 per cent) plan to focus on investments in the over US$100million bracket”.

According to the survey, global investors continued to remain positive about property investment conditions in the Australia/New Zealand region.

More than a third of respondents expected conditions to improve over the next 12 months, with 43 per cent expecting no change.

“Not surprisingly, this positivity towards investment conditions is being reflected in our respondents’ outlook for investment volumes,” Mr Marasco said.

“Only 8 per cent of respondents expected that year-over-year investment volumes would decline in 2013.

“This pattern is also mirrored in investment volumes forecasts, with 59 per cent of participants forecasting an increase in turnover in 2014 compared with 2013.”

Investment transactions data from Colliers International showed that commercial property investment volumes across Australia, between January and October, increased substantially from $16.2 billion 2012 to $18.4 billion in 2013, a 14 per cent change.

“Given the low interest rate environment, the second half of the year is expected to see volumes continue to rise,” Mr Marasco said. “Australia, in particular, is forecast to see a strong finish to 2013 and may in fact, reach pre-global economic downturn levels.”