Australian commercial property transactions to increase by 11% to $44b in 2024

The market is showing signs of strengthening. 

According to a report by Dexus Research, the Australian commercial real estate transaction markets have been quiet over the past 1-2 years, but there are now clear signs of strengthening. Transaction volumes were up 18% in the past 6 months compared to the same period last year. 

“On a pro-rata estimate for Q4 2024, the value of transactions in 2024 is expected to be $44bn, around 11% above the level of 2023. These estimates exclude the pending $9.8bn AirTrunk data centre transaction - so can be considered conservative,” the report said.

Here’s more from Dexus Research: 

Other signs that the transaction market is becoming stronger are that a) the average size of transactions in calendar 2024 year to date is up 60% on 2023, and b) the proportion of institutional buyers has increased from 34% in 2023 to 64%. 

While improving, transaction volumes are still below average so there is a way to go before the market gets back to previous levels of activity. Nevertheless, improving volumes could be evidence that buyers are seeing value at current pricing levels. 

After years of underperforming, retail (shopping centre) portfolios are now outperforming the other sectors as relatively high yields and improving rents and occupancy flow through to valuations. Office fund returns were the weakest at -15.2% over the year, due to significant declines in valuations of office buildings, however, in Q3 there were signs of the negative valuation trend tapering with year-on-year return improving slightly. Unlisted property funds in total returned -0.4% in the quarter and -9.0% over the year. 

Listed real estate pricing improved again in Q3 2024. AREITs benefited from the strength of broader equity markets. While Australian shares returned 7.8% in the year to Q2 2024, the AREIT index returned 24.6%. The extra rise in the AREIT index is an encouraging sign for real assets and signals greater confidence by investors in the underlying real estate markets.