2H 2020 Australia Offices Sector (Asian Cities-Savills Research)

Australia's property markets property as a whole remains an attractive asset class particularly when comparing yields to bond rates, combined with the current low interest rate climate. With the Reserve Bank of Australia cutting the official cash rate to a record low of 0.10% in November, and further quantitative easing measures introduced we will see...

Australia's property markets property as a whole remains an attractive asset class particularly when comparing yields to bond rates, combined with the current low interest rate climate. With the Reserve Bank of Australia cutting the official cash rate to a record low of 0.10% in November, and further quantitative easing measures introduced we will see bond yields fall closer to zero. The COVID-19 pandemic has impacted all property asset classes in Australia to some extent, with both positive and negative outcomes. The retail sector has been the hardest hit as a result of store closures, reduced foot traffic and weak consumer spending.

From both an investor and an occupier point of view we continue to see a flight to quality thematic become increasingly evident. Tenants are seeking quality office space with more flexible terms and we anticipate that as a result of this there will be a divergence of vacancy where secondary stock will find it difficult to compete. Investors continue to seek prime assets with long WALE and diversified tenant compositions, with these assets achieving record yields and capital values. With several large transactions coming to the market around the country or in due diligence we expect to see a strong fi nish to the year and into 2021.