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institutional buyers

The “Fund Gap” Threatens …
Higher-Priced Commercial Property

Earlier this year, you read about a funding crisis pending for Property Trusts and Institutional buyers. And this is not helped by the RuddBank failing to materialise.

With a surge in the Share Market since March, several recent capital raisings have helped some of these larger property owners.

However, with the latest hiccup in Share Market confidence, you’re unlikely to see much more capital raised in this way.

Capital Gap

Capital Gap

As such, Quadrant Real Estate Advisors have concerns with the high debt levels for these owners of Investment-grade property.

As you can appreciate, the financiers are proving to be rather difficult.

Therefore, over the next two years, you could see a gap of up to $30 billion emerge, between properly valuations and what bank are prepared to fund.

But these problems seem to relate mostly to commercial properties worth more than $20 million.

Because, for properties less than $10 million … the market appears conservatively geared, and is experiencing strong demand — especially for properties in Melbourne, priced under $5 million.

So it is somewhat a two-tiered market … with a number of good opportunities starting to emerge.

Private Investors Vs the Institutional Buyers

Private Investors continue to dominate the Melbourne Commercial Office market.

Right now, sales around $20 million are slow; and over $40 million are few and far between.

Suburban Office Sales

Suburban Office Sales


However, the suburban market for properties under $3 million enjoy solid demand from cashed-up private Investors.

Research by Knight Frank shows that last year saw $240 million recorded in suburban Office Sales. And already this year, they have totalled some $100 million.

And 97% of those sales have been to Private Investors.

CBD Office Markets

CBD Office Sales

CBD Office Sales


As a result of the global financial crisis … sales of Melbourne CBD Offices fell in 2008 (to $425.2m) from the level achieved in 2007 (of $850.9m) — according to research released by CBRE.

Institutional buyers and REITs have virtually withdrawn from the market … leaving private syndicates, wealthy families and overseas buyers to transact most of the deals.
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