Overseas interest to drive property market

Low interest rates and attractive returns will continue to attract overseas investors to the Australian commercial property market, CBRE reports.

CBRE head of research Australia, Stephen McNabb, said that sale and leasebacks, counter-cyclical investment plays and yield convergence were set to be among the trends and opportunities that would emerge in the Australian property in 2016.

"Yield compression has driven strong investment returns in recent years," he said.

"However, investors will now increasingly be looking at the income growth fundamentals of their assets and what they can do to improve the growth potential of their individual assets and property portfolios.

"With yields at historically low levels in many markets and submarkets - and with a deep pool of capital - owner occupiers have an opportunity to offload standalone assets and portfolios.

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"Portfolio sales would particularly appeal to overseas investors and this would contribute to vendors achieving maximum pricing."

McNabb noted that rental growth was now evident in Sydney, Melbourne and Canberra office markets, and forecast that 2016 was likely to be the bottom of the rent cycle Brisbane and Perth.

However, he said the CBRE Real Estate Market Outlook report highlighted that office incentives were likely to remain high in most office markets, which would continue to favour tenants seeking to relocate.

He added that the lower Australian dollar was providing some support to the industrial property sector, with rent growth in 2016 likely to improve in most Australian markets, particularly as new supply eases.