Commercial ‘Megadeals’ Hit Record Numbers

Megadeals were the “flavour of the year” in 2019, with $500 million-plus transactions making up almost a third of total commercial real estate deals.

Hong Kong-based investors picked up where Chinese investors left off as cross-border investment in Australian commercial real estate booked yet another record-breaking year.

Real Capital Analytics data revealed that Sydney has been the foremost target of cross-border capital, reinstating itself as the number one destination in the Asia Pacific last year.

The increase in Hong Kong investors, like Link REIT’s maiden Australian acquisition of 100 Market Street, comes as investors pulled back from Hong Kong late last year as political unrest and headwinds caused by the US-China trade war weighed on the commercial market.

Capital trends: Most active countries

$ million% Y-o-Y
1. Japan37,271.45%
2. China32,737.8-1%
3. Australia31,187.80%
4. South Korea21,375.5-8%
5. Hong Kong, SAR, China15,247.0-42%

^2019 volume. Source: Real Capital Analytics.

“Australia has been the most consistent target of cross-border capital flows in Asia Pacific with inbound volumes exceeding US$10 billion every year since 2013,” Real Capital Analytics managing director David Green-Morgan said.

While cross-border capital into the Asia Pacific has historically been led by US and regional super-investors like Blackstone and GIC, European players picked up their interest last year as Allianz entered the scene to become the second largest APAC investor behind Blackstone.

Alternative real estate gained traction as the traditional commercial sectors of office, industrial and retail softened.

Sales of individual hotel assets in Asia Pacific real estate markets soared by 50 per cent in 2019, booking its second record-breaking year in a row although Green-Morgan said it was too early to judge what effect the coronavirus outbreak may have on Asia Pacific markets this year.

Related: Sydney, Melbourne Office Vacancy Still Sub 4pc

Capital trends: Acquisitions by property type

$bn% Y-o-Y
Aged Care2.0240%
Income Properties158.5-8%
Development site666.2-4%

^2019 volume. Source: Real Capital Analytics.

While trends in alternative real estate markets are still volatile at this early stage, Australia is taking the lead in student housing, aged care and self-storage sectors.

Volume for alternative sectors accounted for just 7 per cent of market share in 2019. The report points out: “this low presence is partly because the product has never existed, thus much of it needs to be created before it can trade”.

By investment volume, the top buyers of Asia Pacific real estate in 2019 were Gaw Capital, Blackstone, Allianz, Brookfield and Charter Hall.

While the top buyers and sellers of Australian commercial real estate were Dexus, Brookfield, Blackstone, Charter Hall and Charter Hall’s Long Wale REIT.

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