'Opportunistic' buyers sales transactions hit $4.25b: Savills

They've been flocking to Sydney over the last decade.

According to Savills Australia, opportunistic buyers have been active in the market over the last five years and are prepared to take on ‘risk’ for greater returns. 

Enquiries from opportunistic buyers, often seeking high yielding stock (>10 percent), increased dramatically at the end of last year and has continued to be
strong in the start of 2013.

These buyers, defined by Savills as Private Investors and Owner Occupiers, have accounted for 30 percent of Industrial sales transactions over the last 10 years, totalling $4.25 billion.

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Greg Cohen, NSW Divisional Director Industrial, “The market has never offered such a wide yield spread, with secondary blowing out to 350 basis points higher than prime stock.

“The opportunistic buyer tends to be the private, syndicator that can move quickly when it comes to decision making and carrying out due diligence. It's fair to say these buyers sat on the fence throughout the first half of the GFC and now see real value. They also tend to have low levels of gearing which assists with their speed of decision and processing opportunities.”

The recent sale of 7A Bessemer Street, Blacktown illustrates this point. An Undisclosed Private Investor snapped up the property as a future owner occupier. In the meantime, there is short-term lease in place that will return the new owner approximately 10.3 percent.

“Industrial facilities with short lease expiry profiles are particularly popular with opportunistic buyers, which in general do not appeal to Institutional investors. There exists a number of opportunities in the market for the buyers to pinch some stock from the REITs and Trusts”, Mr Cohen added.

Whilst many of the buyers are seeking older buildings with short WALEs which may not be attractive to REITs, location still remains a priority for opportunistic buyers.

According to Simon Hemphill, Savills NSW Divisional Director Research, opportunistic buyers have made up a significant part of the buyers market for Sydney industrial assets over the last five years.

“Since the onset of the GFC in late 2007, opportunistic buyers have accounted for 46 percent of all sales in the Sydney industrial market, totalling more than $2.3 billion. In the depths of the biggest financial crisis in living memory, these buyers accounted for over 70 percent of industrial transactions.” Mr Hemphill said.

“This is not a great surprise given that these types of buyers act ‘counter cyclically’ and often focus their attention on factors other than initial return. Many buyers of this stock look at the replacement and capital cost plus ongoing capex. Properties have traded recently at a rate of $700-$800 per square metre of building area, whereas a new build would cost circa $650 per square metre.” Mr Hemphill added.