Commercial property returns hit two-year high
Retail and industrial properties are at the heart of a resurgence in the commercial property sector, according to the Property Council/IPD Australia All Property Index Q2 2014 results.
Data, released today, showed a total return of 9.7 per cent for the year to June 2014, with the June total return up 50 basis points on the same period last year, and a 20 basis point increase on the previous quarter, bringing the return from commercial property to a two-year high.
The report revealed that "core property sector returns for retail, office, industrial were 9.8 per cent, nine per cent and 12.1 per cent", with returns from the industrial property sector up 210 basis points.
"Retail sector returns improved from 8.7 per cent a year ago but office sector returns weakened from 9.4 per cent in June 2013," the report said.
"The strong growth in industrial total returns has been led by warehousing (12.4 per cent) and distribution (13.6 per cent) assets as well as assets located in NSW (13.2 per cent).
"With more traditional office and retail assets becoming increasingly expensive, some investors have started to look up the risk curve to find value and industrial, traditionally the riskiest of the core sectors has received increased attention.
"In looking to industrial, investors have shown a preference for warehousing and distribution assets with ties to non-discretionary retail and the strong growth in online retailing."
The report also noted growth in returns from healthcare due to "strong income growth", and hotel assets "helped by strong occupancy and investor demand".
AUTHOR
Nicholas O'Donoghue
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