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Middle Market Sales Moving into the Spotlight

January 15, 2016

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The limited supply and strong demand for stable income-producing bricks and mortar has underpinned record sales results in the middle markets of the Sydney city and metropolitan ring.

Such is the strength that more than $1 billion in what are considered "middle market" assets have either been sold by CBRE alone in the past 12 months or are currently being marketed.

CBRE middle markets director Nicholas Heaton said these high-net-worth investors were driving the continued strength of the sub-$50 million sector, as they consider property to be a more attractive and stable option in light of ongoing ructions in global equity markets.

"Record low interest rates combined with fluctuations and uncertainty in the stock market has resulted in high-net-worth investors viewing property to be the most viable option given the security and return it affords," Mr Heaton said.

Other agents have seen similar demand with James Wilson, NSW director of retail investment services at Colliers International, saying self-managed super funds are also in the market for well-priced retail assets.

These are sales within the $6 million to $50 million band, with buyers ranging from private developers and high-net-worth individual investors.

Mr Wilson said the increasing lack of supply for neighbourhood centre sites in greater Sydney shows no signs of slowing, given the sharp yield compression experienced over the past two years for completed investments.

"The uplift in value for neighbourhood sites and shopping centres can also be attributed to the high levels of capital we are seeing from domestic and offshore investors combined with the low cost of debt in the current record-low interest rate environment," Mr Wilson said.

Twelve owners banded together in one recent sale to sell their block of units at 5 Pavilion Street, Queenscliff, for $10.1 million, as a development site.

Mr Heaton conducted the Queenscliff sale and said the price was $2.1 million over the reserve.

The strong growth in Australia's aged care sector has underpinned the sale of a prominent North Manly landholding – the Warringah Golf Club's clubhouse facilities. No price was disclosed but similar sites have reaped about $6 million.

An aged care provider secured the 4071 square metre property at 397 Condamine Street, Manly.

CBRE's Aaron Arias and Richard Gell, in conjunction with Matthew Sartori from the firm's health, aged care and retirement living team, handled the competitive four-week marketing campaign, with the property attracting significant buyer interest from domestic and offshore groups.

Mr Heaton said other sales included 36 Carrington Street, for $19 million; 50 Bayswater Road, Rushcutters Bay for $10.5 million; 1 Mobbs Lane, Eastwood for $31 million and 1-17 Princess Highway, Sylvania, for $20 million.

The site at 326 Arden Street, Coogee, is also coming onto the market.

"The development market shows no signs of slowing within the 20km, with private developers based in Sydney, Melbourne, Perth and Brisbane competing against offshore developers who view the Sydney market as a safe haven to direct their capital," Mr Heaton said.

"With so many private investors and family offices entering the fray at a local, national and international level, investment deals in the middle market are showing yields as hard as 4 per cent to 5 per cent, with purchasers taking a long-term strategic view on investments in this sector of the market."

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