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February’s 1 per cent cash rate reduction is expected to drive increased investor demand for commercial property, according to CB Richard Ellis (CBRE).
Tom Southern, CBRE president and CEO of Australia and New Zealand said on Tuesday that the Reserve Bank’s rate reductions had laid the ground work for investor confidence to return.
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“Recent market activity has confirmed the improving spread between the cost of servicing debt and the income return on commercial property investments.
“As this momentum builds, more capital is expected to be released into the sector and the squeeze on margins will begin to ease. This will allow more players to return to the market and the first important milestone on the road to recovery will have been achieved.”
According to the property group, private investors emerged as the biggest purchasing group of commercial real estate in 2008, accounting for 26 per cent of all transactions from just 9 per cent in 2007.
While CBRE expects this trend to continue Mr Southern warned that the availability of finance would remain a decisive factor.
