The 2020 calendar year is shaping up to be a big one for investors looking to capitalise on Australia’s middle markets office space.
According to Colliers International Office Middle Markets Transaction Review, current investment opportunities available in the $10 million-$100 million range (which comprises the middle markets office space) “offers investors a competitive yield in the current rental landscape and strong value-growth potential”.
“There were 154 transactions in the middle markets office space in 2019, totalling $4.7 billion,” the research noted.
“Despite metro markets recording significantly more transactions (103 transactions, totalling 67 per cent of assets, compared to 51 CBD assets, 33 per cent), CBD assets were the star performers with an average yield of 4.89 per cent and average capital value of $7,904 per sqm.
“By contrast, Metro assets recorded a 6.23 per cent yield and capital value of $5,638 per sqm.”
Commenting further, Matt Meynell, head of investment services at Colliers International, said: “Transactions from 2019 indicate that the tightening yields in the office sector have not yet affected the middle markets space, when compared to office assets valued at over $100 million.”
“The middle markets asset class proposes excellent returns and growth potential to investors seeking secure and strong growth. The space becomes more enticing in the current volatile economic climate because of the security of the assets and their growth potential when investors focus on unlocking entrapped value.
“This is being seen across all Australian capital cities in both the CBD and fringe/metro office markets; however, the geographic trend becomes most obvious when comparing the tight CBD office market to the metro markets nationally.”