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Commercial property sales hit record in 2017

Commercial property sales hit record in 2017

Kevin Stanley  ●   12 February 2018

Commercial property traders enjoyed another stellar year in 2017, with record sales of transactions greater than $5million worth $33 billion up 22% on the previous year (Source: JLL).

The figures show that office property remained the dominant trading sector, accounting for 58% of all sales ($19.2 billion) compared with 50% in 2016. Office property’s rise came at the expense of other sectors, particularly retail.

Despite the challenges facing the retail sector, $9.8 billion of property was traded in 2017, accounting for 30% of all commercial sales. Industrial sales accounted for 12% of the total, with $4 billion traded, as commercial property yields tightened to record lows.

New South Wales experienced the highest activity, accounting for 42% of commercial property sold last year. Victoria and Queensland together accounted for 43% of all sales (24% and 19% respectively). 

Unlisted property trusts and syndicates were the most active buyers, accounting for 26% of all transactions. Not far behind were listed property trusts at 24%, followed by private companies and investors at 21%.  

Offshore activity remained healthy as overseas investors spent almost $11.5 billion on commercial property, up 9% on 2016. As a proportion of total sales, however, offshore investment fell from 39% of transactions in 2016 to 35% last year.

Asia was the main source of offshore buying, driven by Singaporean investors who bought a third of all of Australian property sold abroad ($3.8 billion). Investor interest from the United States was also considerable, accounting for 19% of offshore commercial property sold ($2.2 billion).

From a global investor’s perspective, Australian property remains a popular asset among a large number of countries.

Sales are typically slower at the start of a new year, however, last year trading was healthy in the first quarter and with $10 billion of commercial property still on the market, the same is expected in 2018.

As the year progresses the levels of commercial property sales are likely to decline as cap rate compression stabilises and potentially softens as bond yields rise.

Kevin Stanley
Kevin Stanley

Head of Property Strategy & Research

As Head of Property Strategy & Research for Commonwealth Bank, his role is to give direction to property lending exposure across development and investment, as well as providing research support to complex transactions. With 25 years’ experience analysing and reporting Australia’s commercial and residential property markets, Kevin has anticipated and measured significant issues impacting the property industry, including the impact of the GFC on commercial values, the role infrastructure plays on property development trends and the emergence of offshore developers in the apartment development sector. Kevin is a Fellow of the Australian Property Institute and has twice been awarded the API Excellence in Property Award for innovation and industry-leading research.

^ This information is based upon Jones Lang Laselle IP, Inc data provided to CommBank and CommBank sources for commercial property transactions greater than >$5mil AUD. This blog is published solely for information purposes. As this blog has been prepared without considering your objectives, financial situation or needs, you should before acting on the information in this blog, consider its appropriateness to your circumstances and if necessary seek the appropriate professional advice. Any opinions, views of contributors, conclusions or recommendations are reasonably held or made, based on the information available at the time of the blog compilation, but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made in this blog. Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian credit licence 234 945.