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Foreign brands raising CBD rents

Sydney cbdThe entry of international brands into Australia has lifted CBD rents by 12 per cent in 2015, led by Sydney with 30 per cent growth, according to research from property group CBRE.

CBD centres saw an increase in demand from international retailers, with close to 60 stores having been opened in 2015, compared to the 40 in 2014 said CBRE in their latest report, ‘Australia Retail, Record Property Transactions in 2015.’

The report indicated that retail investments surged in 2015, achieving record sales volume of $8.9 billion, up 20 per cent compared to that in 2014.

Data shows foreign buyers were responsible for the uplift, contributing 27 per cent of total retail transactions, which averaged 12 per cent over the past 10 years. Seven deals from foreign buyers exceeded $100 million, with a combined total of $1.5 billion (equivalent to 17 per cent of total retail sales volume).

The main foreign buyers were from the US, China, Taiwan and Singapore. Investments from domestic investors remain steady, with the same amount of deals transacted last year at $6.4 billion, the report stated.

The onset of international retailers, however, displaced domestic brands in competing for super prime locations, as foreign buyers are willing to pay higher rents, the report showed. It also revealed landlords are favouring (in the short term) international brands over domestic brands because they want to provide something new to the market, which, they think, the younger demographics would find appealing.

Vacancy rates for CBD super prime space are low with almost zero availability in Sydney and Melbourne.

The strong demand for CBD locations has supported high transaction volumes of $1.6 billion over 2015, with $0.86 billion in the fourth quarter with the report identifying key transactions over the quarter including the 46,000sqm Rundle Mall Place in Adelaide CBD, purchased by Blackstone for $400 million; and the 17,359sqm World Square Shopping Centre in Sydney CBD, purchased by ISTP (50 per cent stake) for $285 million.

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