The Partners Fund continues to benefit from recovering conditions in the office market, particularly the Melbourne fringe office market, following the impact on sentiment from the COVID-19 pandemic. In its Q2 2021 report on the Melbourne Metro office market, Cushman & Wakefield notes that well over half of the expected 2021 supply, ten projects delivering 140,000m2 of new space, is precommitted. Cushman & Wakefield also expect that increasing rent incentives, which have reduced net effective rents, have now run their course, helping to stabilise net effective rents across Metro Melbourne going forward.
The Partners Fund currently has three city fringe office investments in Metro Melbourne. One of these is a 20,000m2 5-Star Green-Star commercial office project in Cremorne which has experienced strong interest, with three anchor tenants secured as the building nears completion. A second investment in nearby South Yarra has seen steadily improving interest, with 3,000m2 floorspace leased in the past month. The stabilisation of net effective rents has also led to increased confidence in asset valuations that reflect high incentives, and Merricks Capital has recently settled on an office investment in St Kilda Road that was based on an updated valuation reflecting high incentives.
In the agriculture sector, livestock prices have been strong and the Eastern Young Cattle Indicator (EYCI) recently hit a new record of 951c/kg, up from 500c/kg January 2020. Global milk prices have also been increasing and we have seen a very strong start to the annual milk season this month. In the wine sector, the average value of wine grapes increased by 1% in 2021 to the highest level since 2008, including a 4% decrease in the average value of reds offset by an 11% increase in the average value of whites. The largest markets for still white wine are the US and UK, compared to red wine where China is the largest market. This has provided some attractive investment opportunities and we have recently partnered with an existing winery to fund a greenfield vineyard development in Victoria, where plantings will predominantly be white wine grape varieties.
