Observations on Value and Risk in the Commercial Office Sector

Written By The MP Report

The commercial office investment sector is being watched with a high degree of focus as movement starts to happen, and after an extreme dry spell, tangible market evidence to benchmark value crystalises.

Based on the correlation between interest rates and commercial office capitalisation rates (income divided by sale value), the investment banking sector has written down the NTA value of REITs (Real Estate Investment Trusts) with exposure to the commercial office sector by 20-50%.

The first market evidence of value diminution has crystallised with the sale of 44 Market Street, Sydney, a 26-level tower. The deal has benchmarked notional value at a c. 17% discount to book value.

Subscribe to the MP Report to read more on the MP Funds Management View of value and risk in the sector, and listen to the latest episode of the Property Investment Podcast with cap-trans agent Ian Hetherington, JV partner with the White Family in the Ray White Capital Transaction Office and who has brokered c. $35bn in commercial property sales in his c. 35-year career.

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Note: Past performance is not a reliable indicator of future performance.

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Latest from the Property Investment Podcast

Stay informed and gain valuable industry knowledge by tuning in to The Property Investment Podcast, hosted by Mandi Prager, CEO of MP Group International. Check out the latest episodes:

  • Ep 23: Ian Hetherington, Director, Ray White Capital Transactions

  • Ep 22: Terry Andriotakis, Lateral Group

  • Ep 21: Michael Hynes, joint MD, Stamford Capital

  • Ep 20 (Pt.2): Matthew Hyder, CEO of Legacy Property

  • Ep 20 (Pt.1): Matthew Hyder, CEO, and Scott Girard, Head of Property, Stirling Property Funds

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This communication is not intended to serve as investment advice or an investment recommendation. The content does not take into account your financial objectives, situation or needs. You should do your own research and, if appropriate, obtain independent advice from a suitably licensed professional before making investment decisions. 

* Actual investment performance may differ materially from forecast returns. 

** Please note that past performance is not a reliable indicator of future performance.

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Increasing Interest Rates and the Commercial Office Sector: Can Pressure Create Diamonds?