Sydney CBD core prime office yields hit a nine-year low at 5.2% in the September quarter, according to the latest Market Flash highlights from CBRE. Secondary yields are also 20 basis points off their pre-GFC low of 5.9%.
But even though the current office sector has similarities to the market pre-GFC, CBRE’s senior director Michael Pisano said that some key differences suggest that the current growth cycle might be maintained for longer.
“Capping off an impressive run in yield compression over the past three and a half years, Sydney CBD yields have reached pre-GFC lows – without the same level of market rental growth to stimulate pricing when compared to the market in 2007,” said Pisano.
“Evidencing this, the drivers of the current market are vastly different when compared to the previous cycle, which further suggests a greater degree of sustainability.”
For one, it is the sustained low interest rate environment that serves as the main driver of yield compression.
“A long period of lower interest rates has been the key stimulus to the current cycle. However, the next phase will be supported by lower vacancy rates and forecast rental growth,” said CBRE head of research Stephen McNabb.
“Importantly, this rent growth is following, not leading, the yield compression, which is in stark contrast to the performance of the office market after the GFC.”
Do you have more than $200k in your super fund? You could use your super to buy property - Find out how
Top Suburbs :
Get help with your investment property
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus an appointment is free.
We value your privacy and treat all your information seriously - you can check out