Mirvac's sale of a two-thirds stake in its planned $2 billion Sydney office tower to Japanese conglomerate Mitsui Fudosan is Australia's largest commercial property deal for 2023-24.
Mitsui Fudosan's $1.32 billion acquisition of a majority stake in the 55 Pitt Street project was the most valuable commercial real estate transaction in the 12 months to June 30, 2024, according to MSCI data.
Preliminary results showed Australian commercial property transaction volumes will total $41 billion in 2023-24, down about 30% on the previous year, MSCI said.
Benjamin Martin-Henry, head of real assets research in the Pacific at MSCI, said much of the market commentary had focused on the office sector's poor performance, which was broadly justified.
“However, encouragingly, market activity in the office sector has increased recently, with provisional figures for second quarter transaction volumes at $3.1 billion, up 57% compared to Q2 2023,” Martin Henry said.
Recent office deals include Mirvac's sale of half of its stake in Sydney's National Australia Bank House to Singapore-listed Keppel REIT in April for about $364 million.
Mirvac also sold the office asset at 60 Margaret Street in Sydney, which it co-owned with Blackstone, to Ash Morgan and Japanese property developer Mitsubishi Estate for about $796 million last year.
Residential and industrial real estate also made headlines last year, with one of the most notable transactions being the sale of land leasing company Serenitas by Singapore government-backed fund GIC to Mirvac and Pacific Equity Partners Secured Assets (PEP) for around $1.01 billion in October last year.
Another major deal last year was Lendlease's sale of 12 housing estates to a joint venture between Stockland and Thai investor Supalai for more than $1 billion.
The deal was announced in December last year but has been held up by the Australian Competition and Consumer Commission, which argues it will reduce competition in four markets – New South Wales, Western Australia and Queensland.
Martin Henry said the land leasing sector was one of the fastest growing in the country.
“Looking forward, the outlook for the Australian land leasing sector remains positive,” he said.
“The combination of demographic changes, rising home prices and lifestyle preferences suggests demand for land lease communities will continue.”
In the industrial sector, Unisuper and ISPT reportedly acquired the brownfield industrial development at Burra Park, near Western Sydney International Airport, in March for $850 million, according to MSCI.
Industrial giant Goodman Group also sold a portfolio of 12 industrial properties to Rest Supermarket and Barings for about $780 million in May.
Industrial real estate transactions fell 21% last year compared with the previous year, while office transaction volume fell 40%, according to preliminary data from MSCI.
Retail trade volume for 2023-24 is expected to be around $1.8 billion, down 16% from the previous fiscal year.
Although transaction volumes remain subdued, there are signs that commercial real estate activity may increase over the next 6 to 12 months, supported by new sales listings, inquiries and pending transaction data.
Realcommercial.com.au property for sale listings and enquiry figures show an increase in activity among buyers and sellers over the last financial year.
The number of properties sold in FY23-24 increased by 15 percent for industrial properties and 10 percent for office and retail properties compared to the previous fiscal year, while enquiries from buyers increased by 11 percent for office properties and 8 percent for industrial properties.
Anne Flaherty, senior economist at PropTrac, said commercial trade volumes were expected to increase next financial year.
“The gap in price expectations between buyers and sellers remains a factor, but that gap is narrowing,” Flaherty said.
“Yield expansion has slowed across most asset types, but is probably not over yet, and investors who waited until prices had fully corrected are starting to re-emerge.”
Flaherty said the increase in inventory on the market suggests more sellers are looking to close deals.
Rising vacancy rates and higher holding costs could also lead to more sales of distressed properties, she added.
Martin Henry also expects deal activity over the next 12 months to be stronger than the past 12 months.
However, he believes the two-tiered structure of the market will remain, as trading volumes for higher quality assets will grow while secondary quality assets are likely to still struggle.
“There's about $3 billion worth of assets waiting to be settled, which is a pretty big amount in itself,” he said.
“The general consensus across many asset classes is that markets are approaching or have reached cycle bottoms, so we expect to see increased trading activity as investors look to secure deals before prices start to rise again.”