Interstate, offshore players turn their attention to South Australia

Savills Adelaide comments on the year that was 2017 for commercial property

MELBOURNE, December 14, 2017 – A diverse range of deals has characterised South Australia’s commercial sales and leasing markets throughout 2017, according to industry experts.

Savills Adelaide’s Capital Transactions and Office Leasing teams have delivered a series of successful transactions throughout the past 12 months, with interstate and offshore buyers increasingly active on the buy side, and the state government looking to commit to more than 45,000sqm of office space on the leasing side.

Capital Transactions

Capital Transactions director Peter Isaksson said 2017 had been a year of “significant interest in the SA market”, particularly from interstate and overseas buyers searching for yield.

“Throughout the past month, we have been contacted by numerous interstate and overseas buyers saying they want to focus on SA in 2018 and will be visiting every four to six weeks to look at opportunities,” he said.

“These players have commented that it is very hard to buy property on the eastern seaboard, where yields are very low and looking like they’ll contract further in 2018,” he said.

In the last quarter of 2017, Savills has sold two childcare centres, one in Blair Athol for $ $6.325 million and one in Golden Grove for $6 million, at circa 6.0 per cent yields. The team has also contracted a property in Rundle Mall, Adelaide’s internationally renowned retail precinct, for a circa 5.0 per cent yield.

At present, the Retail Investments team is busy preparing submissions for two significant properties, which are set to hit the market after the Australia Day weekend.

Office Leasing

On the leasing side, Office Leasing director Adam Hartley said 2017 saw an increase in smaller tenant activity for sub-500sqm spaces, a stabilising of the vacancy rates at 16.1 per cent and, “for the first time in years”, positive net absorption.

The South Australian government is in the market for several large requirements for circa 9,000sqm, 14,000sqm and 22,000sqm spaces, off the back of securing 7,000sqm at 50 Flinders Street.

“Other notable tenants’ transactions include the Attorney-General’s Department and another blue-chip corporation soon to commit to the Charter Hall development on Franklin Street,” Mr Hartley said.

“70 Franklin Street has secured a number of tenants, including Cooper Energy to level eight for a total of 1,235sqm.

“1 King William Street’s repositioning is nearing completion and the recent addition of NNQ to activate the ground-floor café/restaurant has resulted in an impressive entrance.” One of the new tenants to 1 King William Street is Alinta Energy, which is taking half of level 14, while two more tenants from the energy and financial sectors are looking to secure space in the near future for a total of 5,000sqm, with Mr Hartley negotiating all transactions.

Looking to 2018, Mr Hartley said an increase in smaller companies that supported the mining and defence industries was expected, and they would require modern and flexible workspace.

“There will be an opportunity for lower-grade buildings to be repositioned to suit this increasing demand,” he said.

Mr Hartley said incentives were anticipated to hold for the majority of 2018 but may trend downwards in the later part of the year, and encouraged tenants to act quickly to take advantage of the current conditions.