Market Overview - VIC
VIC Market Overview from Danny Clark GrossWaddell ICR
Q. What are the key market trends occurring throughout 2021 in your region? A. In regard to commercial investments, we are seeing a surge in private investors and high net worth families dominating the market especially outside the CBD as they chase steady income, long leases and medium to long term development upside. Hence, assets which are deemed ‘pandemic-proof’ are generating record yields rarely seen in the market. However, given the rise in demand and limited opportunities within metropolitan Melbourne buyers are prepared to pursue opportunities in regional Victoria or even further afield to satisfy their acquisition mandate. Development sites continue to be a hot commodity with record prices being achieved in most sectors including greenfield developments, brownfield developments as well as the luxury apartment market. Large scale apartment developments in the middle to outer ring of Melbourne are keenly pursued but seldomly found, with the greatest demand for projects that offer potential to convert to build-to-rent, social housing, hotel, commercial or vertical aged care/ retirement. Q. What have been the fundamental drivers of demand amongst buyers? A. The housing market has outperformed all expectations over the past 12 months and there is no end in sight. Low interest rates and soaring median house prices have forced buyers into the outskirts of Melbourne and regional Victoria due to affordability. Townhouses and apartments provide an alternative for end purchasers to buy in their suburbs of choice at a lower price point than buying houses. Therefore, developers continue to aggressively chase infill and apartment developments within blue-chip locations as there is an already existing buyer pool. Q. Reflecting on recent transactions, what has been the profile of buyers and has this shifted from previous years? A. Whilst we continue to see considerable appetite from offshore buyers fromMalaysia, Singapore and Hong Kong; the past 12 months has seen a significant uplift in local high net worth’s looking to place their capital. This has been in both direct and indirect investment or potentially as funding/ capital partners. When you consider the luxury apartment market, we continue to see a strong appetite from credible local developers or established offshore backed developers. This is because track record and reputation has become more and more important when selling the end product of the luxury apartments. Q. What types of assets are most in-demand given the current environment? A. All sectors of the marketplace remain buoyant at present including retail, office, industrial and residential development. Industrial developments would have to be one of the most in-demand sectors at present, with our team selling out of two (2) industrial developments with a combined 50-60 transactions in less than 3 weeks.
For me, premium apartment developments in blue-chip suburbs are still the flavour of the month. Melbournians are becoming more and more accustomed to living in apartments and it provides a lifestyle of choice for both the younger generation to the downsizer market. Q. How would evaluate the impact of the past eighteen months in your local market? A. The local market has moved from strength to strength despite the current predicament we face. As demand for land-rich investments and blue-chip developments have surged, buyers are forced to be more creative and are prepared to look beyond the current predicament. Melbourne still continues to enjoy strong population growth and at present, our apartment pipeline isn’t keeping up with the expected apartment completions. Q. What are your expectations for the commercial property market over the next twelve months? A. Looking ahead for the next 12 months, we expect Melbourne’s commercial property market, which had a quiet 2020 due to lockdowns, to continue to improve through 2021 and into 2022 driven by increased optimism and the sheer amount of unplaced capital within the market. We expect late 2021 to be aflush with opportunities given the past 2-3 months of lockdown and this will ensure buyers fiercely compete as they’ve have been forced to sit on their hands for some time. Q. Talk us through the most significant deals you have transacted thus far in 2021. A. 79-83Wattletree Road, Armadale was one of the most hotly contested campaigns that we have been involved with in 2021. The property comprised three amalgamated titles and came permit approved for a 5 storey building consisting of 38 apartments. The campaign saw 231 enquiries and resulted in 13 offers from offshore developers, established local developers and premium builder/ developers, with the eventual purchaser being a well-established and highly reputable local developer who paid $16,000,000. This sale set newmarket records for the area and promises to be an amazing project upon completion. Another fiercely contested transaction that our team concluded this year was 441 Grimshaw Street, Bundoora. The property was a 1.9 ha industrial site that came with holding income but offered development upside. The EOI generated in excess of 150 enquiries and 16 offers from owner occupiers and developers alike. Given the high level of interest, a 2nd round process via BoardroomAuction was conducted inviting the shortlisted groups to participate in person and online, which led to a flurry of bids and a price $1,700,000 above reserve, selling for $11,300,000.
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