Macquarie predicts commercial property rebound
Macquarie Direct Property has launched a commercial property syndicate based on its conviction the sector is on the verge of rebounding strongly from a 30 year low.
The East Coast Portfolio syndicate will invest in five office buildings in the central business district markets of Melbourne and Brisbane, as well as the growth areas of Parramatta and St Leonards in Sydney.
Macquarie Bank head of property research Rod Cornish says the office market has been “looking very grim” over the past two years with vacancy rates rising and effective rents falling.
Cornish says the duration and extent of the downturn has been strong, and “people are looking at the here and now and finding it hard to come to grips with an improvement”.
However, he says all leading indicators have turned positive over that past 12 months, and predicts a lag of between nine and 12 months before the commercial property market turns.
“Generally when you get markets this weak, when office markets do improve they pick up very quickly, so the pick up in demand will be significant,” Cornish says.
“Coming from a really weak period to a positive period it is not going to be happening quickly as demand for office space is reliant on economies and it always takes time to work through the system,” he says.
The buildings in the Macquarie syndicate are worth $170.5 million, with the group seeking to raise $102 million.
Macquarie Direct Property chief executive Richard Cutler says the syndicate is an opportunity for investors to access a portfolio of property acquired below insurance replacement cost, as well as in commercial property assets that are diversified by location and income stream.
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