Commercial property is a mid-risk sector and is increasingly being accepted as a mainstream asset class. Direct property differs from public equity or sovereign bond markets because it is an illiquid asset class, and multisector fund managers apply a liquidity risk premium for investment into direct property and other real assets. One of the challenges for real estate investors is assessing the relative level of liquidity among commercial property markets. In this article, JLL seeks to make a contribution to understanding liquidity in the Australian commercial property sector. Specifically, we will make an assessment of liquidity levels across Australian CBD office markets and identify a number of implications for portfolio construction.

Transaction volumes as a proxy for liquidity

Fund managers have historically used transaction volumes as a guide to liquidity within the commercial property sector. Following the global financial crisis, transaction vo