Sydney, Melbourne offices best in class: Standard Life
British investment house Standard Life expects Sydney and Melbourne office properties to be the top performers in Asia Pacific commercial real estate in 2017.
Standard Life, which manages £22 billion of real estate investments, also backed Australia’s major regional shopping malls to perform well – while being not bullish overall on retail property.
Standard Life also expects distribution and logistics facilities that feed into the demand from the likes of Amazon and e-commerce in general to do well and expects Australia’s commercial property markets to attract a rising share of offshore investor capital.
“The top performers [in the Asia Pacific] should be Sydney and Melbourne offices given a resilient Australian economy, while dominant prime regional shopping centres should also perform well,” said Anne Breen, global head of real estate research and strategy at Standard Life.
“Perth offices, Hong Kong office and retail, Singapore office and retail and some mainland China office markets are expected to underperform given high and growing supply, and weakening demand,” she said.
In March, the global investment house described the Australian housing market as “frothy”. But it believes that Australian commercial property values, which have surged in recent times on a wave of offshore and local investment, are being driven by global investor demand.
“We argue that the forces propelling Australian real estate values are global in nature and, in addition to the diversification benefits, investors can benefit from investing in these global trends with conviction,” Ms Breen said.
These trends, she said, were the “global appetite for income; under-investment of core global markets in the last decade; diversification benefits of ‘alternative’ real estate asset types; shift towards multi-use flexible assets; retail’s pain versus distribution’s gain; an ageing population’s requirement for healthcare and retirement living options; and the persistent wealth flow from China”.
While Standard Life believes global real estate market investment flows may have peaked in 2015, its global real estate house view “continues to indicate opportunities for investors in developed real estate markets across the world”.
“With the largest share of the capital cycle behind us, investors seeking a strong inflation-linked or secure income profile continue to seek exposure to real estate.
“This search for yield is resulting in a wider pool of real estate ‘alternatives’ entering the mainstream,” she said.
