SA MARKET OVERVIEW
SOUTH AUSTRALIA
Ben Parkinson - Managing Director – Head of Capital Markets – SA - JLL
Reflecting on 2023, how would you describe the year in terms of activity, buyer and vendor sentiment and what were any underlying trends that stood out? 2023 has been an unusual year when it comes to transactions in the South Australian market. The market has been dominated by private investors recycling capital in the lower priced brackets with minimal participation from the institutions funds and syndicators. In an investment market where we have seen such a sharp increase in funding costs it is not surprising to see lower participation as investors take a more conservative view in an unknown funding environment. We have seen an increase in ‘opportunistic’ bidding from the private investor community as they look to take advantage of cautious sentiment from the investment fraternity. On-market transaction volumes seemed to be comparatively lower, but what did you observe in the off-market space in 2023? The most recent JLL research for the APAC region estimates that capital transaction volumes will represent approximately 60% of 2022. That said, investor sentiment still remains significantly higher in the Asia Pacific region then it does by comparison to the Americas and the European markets. With 2023 being somewhat of a price discovery year and the gap between purchases and vendors only now beginning to narrow has given rise to a very brokerage centric market. There has been a lot of activity in the off market space we see many assets being presented to multiple buyers but with very few transactions occurring. Which asset classes best withstood the market headwinds in 2023 and is this likely to continue into 2024? in a post pandemic investment world with three major asset classes continue their resilience in the
face of higher interest rates. The industrial sector has continued to be highly sought after in South Australia as the lack of available employment land and modern industrial space for lease has bolstered appeal to investors for sheds. The retail sector particularly those with a Coles or Woolworths anchor in the neighbourhood shopping centre space have been in significant demand nationally and yields have held up well as this defensive asset class garners investor recognition and traction. Supermarket sales growth has largely been in line with CPI growth in Australia meaning that assets with turnover linked rent reviews have performed well and attracted significant capital by comparison to other asset classes. 2023 has seen the continued rise in appeal for alternative investments and we still see active capital for medical centres, living sectors and data centres nationally we do not see this changing in 2024; in fact we expect to see an increase in appeal and capital flow to the living sectors. Can you tell us about some of the biggest transactions in your state in 2023? In what can best be described as an unusual year for investment sales with volumes being particularly low the highest price for an office transaction was not in the CBD but on Mersey road Osborne where the fund transacted at $46 million. Other than that the highest reported CBD office sale was at 99 Frome Street for $13 million. Some significant activity in the development site sale market with JLL transacting lot 31 and 32 Victor Harbor Rd for $23.1 million, lot 707 in Bedford park was eventually sold to facilitate the construction over a new Bunnings store for $17.1 million and perhaps the most significant development site sale being only site of the former Newmarket Hotel in the CBD selling to Australian Unity for in excess of $38 million reflecting an impressive rate per square metre of approximately $13,000.
BEN PARKINSON
124 – November / December 2023
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