Year-to-date 2019 sales transactions stand at $285.37 million for properties above $10 million in Adelaide CBD.
Adelaide’s office market confidence continues to grow due to strong investor demand and new entrants into the market, according to Knight Frank’s latest Adelaide CBD Office Market Overview.
The report found that both the investment and leasing markets had experienced positive growth and that to July this year, the Adelaide CBD had recorded positive net absorption of 15,824 square metres.
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Knight Frank’s Chief Economist Australia, Ben Burston, said that confidence had largely been driven by significant investment from defence and mining projects.
"Year to date 2019 sale transactions currently stand at $285.37 million for properties above $10 million in Adelaide CBD," he said.
"At the current rate, sales volume for CY2019 should exceed the ten-year average, especially given a number of office buildings in Adelaide CBD are currently under offer."
According to Guy Bennett, Knight Frank’s Partner, Head of Institutional Sales Victoria & South Australia, demand in Adelaide was predominately from interstate and offshore capital, more particularly from Singapore.
He said this was partly due to the attractive value proposition for investors seeking higher income returns as average prime yields across the Eastern Seaboard are 100-200 basis points firmer than South Australia.
"Ongoing demand from investors ensures yields for prime assets remain strong," Bennett said.
"In the six months to July 2019, average prime yields tightened from 6.76 per cent to 6.62 per cent, while the secondary market saw a fall in yields from 8.23 per cent to 8.1 per cent."
The Adelaide leasing market also remained strong in line with firm economic conditions and continued investment from sectors such as defence and mining, said Knight Frank’s Martin Potter, Partner, Head of Office Leasing South Australia.
"Locally, most leasing transactions are relocations, however, net absorption has been driven by new tenants entering the new market and tenant expansion, growth often associated with the defence and mining sectors," Potter said.
"Those tenants who are relocating, are typically migrating from secondary to prime office buildings, particularly new generation prime buildings built after 2006.
"As the market continues with a period of limited supply, we may see a further tightening in prime grade vacancy, buoyed by an improvement in underlying market fundamentals."
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