Q1 Real Estate Activity dropped 20%31 March 2020
The affects of COVID 19 on real estate markets is very apparent at the operating level and now latest data from RESourceData reveals the extent of impacts on transaction activity.
RESourceData collects transactional activity on Office, Retail, Industrial and Development sales over $5m across Australia. First Quarter real estate sales recorded by RESourceData total $5.6bn, down -55% on the previous quarter and down -18% on the same period last year.
The first quarter is typically the quietest period in real estate as very little activity occurs in January, so the comparison to the previous quarter is not as relevant as the comparison to the same period last year.
The data, which is based on settlement dates where possible, will often lag purchasing behaviour as most sale contracts are exchanged over 60 days prior to settlement. The impacts from COVID19 were very evident in the last few weeks of March. Activity in the remainder of 2020 is expected to deteriorate further as capital markets dry up.
Retail sales in the first quarter totalled $744M, up +12% on the same period last year. Activity was concentrated in the convenience sectors with 1 Sub Regional Centre sale worth $110m, 16 Neighbourhood Centre Sales worth $400m, 4 Bulky Goods Sales worth $125m and a $100m of strip/convenience retail sales. The largest sale was the Armadale Centre sold by Lend Lease for approx $110m.
The weighted average cap rate of retail sales was steady at 5.7% for the quarter.
Office sales in the first quarter totalled $2.6bn, down -42% on the same period last year. RESourceData recorded 28 office transactions in this period with just over 54% of sales in CBD areas, with 43% in metropolitan areas and the balance in regional locations. NSW accounted for 46% of sales in the quarter for Victoria, Queensland and WA each with 18% market share. The largest sale was of 1 The Esplanade in Perth for $400m, followed by 66 Eagle Street Brisbane for $380m.
The weighted average cap rate of office sales was 5.3% for the quarter, 20Bps softer than the previous quarter.
ReSourceData recorded 42 Industrial sales worth approx $600m in the first quarter, down -5% on the same period last year. The largest sale record was of 385 Francis Street Brooklyn to Time & Place. Whilst technically the sale will become a future development, it was sold without an approval and tenants in place.
The weighted average cap rate of industrial sales jumped 230bps to 7.5% for the quarter, however we acknowledge that this is based on limited reported yields on the sales.
Development site sales totalled $1.7bn in the first quarter, up 32% on the same period last year, due predominantly to the large acquisition reported by Stockland in Box Hill NSW as well as the sale to Mirvac of the Channel 9 site in Willoughby NSW. A total of 70 transactions were recorded in the quarter.