Foreign investors surging back into commercial property in Australia

“There was quite a strong uptick in the amount of foreign investment this quarter,” said Ben Martin-Henry, Real Capital Analytics’ head of analytics. “Cross-border investment accounts for about 41 per cent of sales volumes for Q1.

“It certainly is quite encouraging that offshore investment accounts for a quite lot of sales activity so far.

Singaporean investors have been the most active so far in 2021, with $900 million worth of acquisitions, an increase of about 17 per cent compared with the same period in 2020.

Mr Martin-Henry cited the almost $4 billion sale of a portfolio of logistics assets accumulated by Blackstone, to Hong Kong-based ESR and the Singapore sovereign wealth fund GIC, as evidence of the high demand among offshore investors.

“I would expect offshore investment to be significantly higher this year considering ESR and GIC just spent $4 billion on one set of assets. We have seen an increasing trend of offshore investment over the last few years, and I would expect this to continue.”

Mr Martin-Henry said it was “no surprise everyone is targeting industrial at the moment. It is the hottest property class around the world”. But offices were still in favour with foreign buyers.

“It is always going to be these days, a tug of war between industrial and office.”

Ronak Bhimjiani, JLL WA strategic research manager, said it had been expected that foreign investment in Australian commercial property during 2020 would be problematic because of COVID-19 restrictions, but that was not the case.

“I think the attractiveness of the Australian commercial property market actually enabled offshore capital to still come to Australia in 2020, even though there were some investment barriers,” he said.

“If you look at all office transactions in 2020, the figure is around $10.5 billion worth of transactions across the office market in Australia; $6.15 billion, or 63 per cent, of that was by overseas offshore investors.

“So, it is still a sizeable amount despite the fact we had that threshold down to $0, so they still managed to invest because of the attractiveness of the office market. A lot of that money was coming in from Singapore – 25 per cent of that $6 billion came from Singapore, 13 per cent from China and 11 per cent from Germany.”

Across the country, Mr Bhimjiani said the $10 billion in transaction figures for the office market in 2020 were less than half of the $22 billion recorded in 2019.

“So, it’s more than halved in the space of 12 months, and that’s all down to COVID as well from a risk perceptive, but it’s still in demand,” he said.

“It takes you back to 2012 sort of figures; that’s where we were last at $10 billion.

“If you look at the industrial market across Australia, it was more robust; $4 billion of investment sales in 2019 nationally, and in 2020 it was up to $4.5 billion … and the bulk of that was done in NSW and Victoria.”