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September 19, 2017

Adelaide will continue attracting local and international capital, thanks to its burgeoning CBD landscape that is presenting opportunities for investors and developers alike.

Recent Local Government investment into Adelaide including the City Council’s ‘Laneway Master Plan’ is transforming the amenity and connectivity of the CBD. The plan, which aims to activate under-utilised laneways running from North Terrace to the Adelaide Central Market in the centre of the CBD, could soon see the city rivaling Melbourne’s famous laneway culture – a city which was recently named the World’s Most Liveable City for the seventh year running by The Economist.

This new hospitality and retail spine will further enhance the already strong reputation of Adelaide as a food destination while other development activity underway in Australia’s Southern state is further enhancing the attractiveness of the city. These include the anchor points for the laneway redevelopment project, the Riverbank Precinct along North Terrace, and Adelaide Central Market precinct in the heart of the CBD, which are both slated for major upgrades. Meanwhile, the redevelopment of the Adelaide Convention Centre has completed, a refurbishment of the Festival Plaza is underway and a AU$330 million expansion of the Adelaide Casino to incorporate a luxury hotel and ground floor restaurant and retail areas is scheduled to commence in early 2018.

According to Jamie Guerra, Managing Director of JLL Adelaide, in an increasingly competitive investment landscape, buyers are attracted to cities where a lot of development is underway. “When a city is in a state of transformation like Adelaide is, this presents more opportunities for investors and developers to enter or expand in the market – not specifically in the projects being redeveloped, but across the whole spectrum of the market.”

Guerra added that this was reflected by the high level of investment Adelaide was receiving not only from local capital, but international capital.

“Investment from offshore capital represents around 25 percent of the total investment into Adelaide over the last 10 years,” he says. “What’s really interesting is that the average investment from foreign parties sits at around AU$75 million per asset, which is very heavily skewed to the larger end of the market, demonstrating that offshore buyers in particular gravitate towards larger, flagship assets to own and redevelop. This has been enhanced by the broader sense of global economic uncertainty and the stability of Australia’s office market.”

One such major offering currently on the market, and likely to attract high levels of offshore investment, is the ‘Central Market Arcade Redevelopment’ – a 8,577 square-metre site within the city’s ‘Market District’ with a number of potential uses from hotels and student accommodation to residential and commercial.

Guerra, who is working with the City of Adelaide to gather interest from developers for the site, said other factors, such as Adelaide’s rising population of international students, are further increasing the city’s attraction and viability for developers.

“Student enrollments in South Australia increased by 6.5 percent to the end of 2016 and the location of the Central Market Arcade is situated to capitalise on this growth, with access to the Central Market, Victoria Square, the Gouger Street restaurant strip and Chinatown at its doorstep,” he said.

International tourist visits to Adelaide were also up 6.5 percent year-on-year to March 2017 and more importantly, international tourist spend is up 12 percent.

But it’s not just cultural developments which are attracting investors to Adelaide’s commercial real estate sector – it’s also the market fundamentals, particularly in the office sector says Andrew Ballantyne, JLL’s Head of Research for Australia, citing that Adelaide is classified as a ‘low beta’ CBD office market. “This means acquisition of a modern well-leased asset in Adelaide can be viewed as a defensive investment. The volatility of office market returns in Adelaide has also been comparable to Sydney and Melbourne over the past 10 years. Across the country, investors are seeking to achieve a balanced portfolio with exposure to defensive markets forming the cornerstone of those portfolios.”

“Our data also shows that Adelaide’s CBD office market was the second most liquid out of the other CBD markets between 2000 and 2016. Liquidity is one of the key investor considerations in real estate and the relative liquidity of Adelaide ensures there is less risk around any potential exit strategy,” he said.

Click here to read more about Australian real estate investment.

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Jamie Guerra

Managing Director, JLL South Australia

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