Industrial and Office in Crosshairs for International Capital in 2023

Asia Pacific investors are expected to back industrial and office asset classes in Sydney and Melbourne this year as they look to deploy capital. 

CBRE research indicates Sydney is Australia’s top market for international real estate capital, ranked 4th in Asia Pacific, while Melbourne has improved its rankings from 10th last year to 8th in 2023. 

And while industrial and office assets are in the crosshairs, CBRE’s head of capital markets, Greg Hyland, said almost one third of investors would be pursuing “opportunistic strategies” this year. 

“Despite healthy levels of fundraising, most investors are adopting a cautious approach as they look for signs of yield expansion and the interest rate tightening cycle to stabilise,” Hyland said.

“We are expecting investment activity to accelerate in the second half of the year.”

Tokyo was the top market where international capital was interested in investing, followed by Singapore and Ho Chi Minh City in Vietnam. 

And while office occupancy rates remain muted, according to the latest figures, the CBRE investor intentions survey data shows that the office sector remains appetising for foreign capital investment. 

CBRE head of research Dr Henry Chin said more than 60 per cent of investors expected to find discounts in retail and Grade A offices in 2023. 

“While there is a drop in interest in office largely due to concerns about the current level of yields, the survey finds that core investors still opt for offices as their top choice,” Chin said.

“Investors are also showing much stronger interest in the residential sector, especially multifamily/build-to-rent.”

And while industrial has been on a hot streak there is further evidence that the moment is over. Investors indicated they were less likely to bid above the asking price this year at 11 per cent, compared to 35 per cent last year.