Market Overview - SA
SA Market Overview from Oliver Totani Knight Frank
Q. What are the key market trends occurring throughout 2021 in your region? A. Adelaide has certainly come of age, with an economic narrative built upon Defence, Bio-Med, Education and Hi -Tech Manufacturing, investors are now looking to Adelaide as a real and genuine investment alternative to the overheated eastern seaboard markets. Q. What have the been the fundamental drivers of demand amongst buyers? A. SA now has a vibrant and multi-faceted economy, however the buoyancy in our market has also been driven by SA’s value proposition. The yield arbitrage between SA and the eastern seaboard still sits in the .75% to 1.5%depending on asset class and individual dynamics. So, with Australian commercial property at large in a ‘bull market’ finding value is challenging, so when considering Adelaide and its risk profile. This yield spread looks real inviting to investors. Q. Reflecting on recent transactions, what has been the profile of buyers and has this shifted from previous years? A. There is no doubt in our mind that the perception for Adelaide has changed in the minds of investors not just interstate but also for those around the Asia-Pacific region and other offshore jurisdictions. With Adelaide now acknowledge as the 3rd best city in the world by the Economists Intelligence Units Latest Global Liveability Index, we have gone from being perceived as a regional centre to almost a real ‘world city’. Q. What types of assets are most in-demand given the current environment? A. There is no doubt Core Industrial and Non-Discretionary Retail have outperformed over the last 12 to 18 months, this is not unlike the form through the other Australian capital cities. However, again there is still relative ‘value’ here in SA, as land rates are still lagging significantly behind the eastern seaboard, so getting development deals to stack, especially in the Industrial space, are far more likely, as rents are relatively equivalent across most Australian Capital Cities. Q. Howwould evaluate the impact of the past eighteen months in your local market? A. The COVID19 pandemic has caused many issues across the globe, however, in a SA context it’s been the best thing to ever
happen to our State. The reason being, the State was one of the best performers when it came to its Health response, meaning our economy essentially remained opened throughout the last 18 months, where most others lived through rolling shutdowns. In my opinion, this response and its effect on the State has meant much of the forecasted short to medium term growth (3-5 years) has essentially been brought forward. Keeping in mind, we have been playing catch up for some time, so it would seemwe have finally arrived at the ‘head table’. Q. What are your expectations for the commercial property market over the next twelve months? A. I certainly don’t have a crystal ball but should the marco environment remain in a state of ‘status quo’ then we are likely to see the market remain stable and continue to push benchmarks. However, we can’t forget that property is a cyclical game, so we can’t be foolish enough to think that the property market is impenetrable to broader economic shocks. Watch the China space, this Taiwan situation could be the catalyst for some type of broad-based market correction i.e. in the form of a change in consumer sentiment. Q. Talk us through the most significant deals you have transacted thus far in 2021. A. Knight Frank Investment Sales (SA) have been fortunate throughout 2021, to have been entrusted to control a large majority of the state’s largest transactions in 2021, whilst also supporting our clients in the more traditional commercial markets. The highlights have probably been the transactions of NAB House, at 22 KingWilliamStreet, Adelaide for $48.65 million, Apex Steels new Facility at 51 Caribou Drive for $38.45 million, the ANI headquarters at Osborne for $48.25 million and most recently the largest medical transaction in SA for some time being the Tennyson Centre for $92.75m. With regards to the traditional markets, we have concluded more then 30 transactions over the course of 2021, transacting more than $125m. We are truly humbled by the support and trust our clients put in us, we hope we can continue to outperform for them.
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