Office Sector Lures Offshore Investors

Offshore investors are taking a shine to office assets, making up 66 per cent of acquisitions in the Australian property market for this year.

This is well ahead of the industrial sector at 22 per cent, and retail at 8 per cent, according to the CBRE Capital Flows report.

This comes despite the office sector having a particularly troubling time due to Covid restrictions and remote work arrangements becoming commonplace.

The report shows the pandemic also impacted the total investments in Australia, which dropped 46 per cent to $15.3 billion compared to last year.

The biggest slowdown in sales was for both retail and hospitality, with hotel sales down 73 per cent and retail down 55 per cent on 2019.

Meanwhile, industrial transactions have doubled to $4.6 billion as the sector's stable outlook holds appeal for real estate investment trusts.

International investors account for 40 per cent of all these transactions, with the majority of buyers from Singapore—spending $3 billion Australia—followed by Germany at $1 billion and China at $450 million.

Notably absent were United States investors: inside the top three sources of offshore capital for the past decade, they spent a mere $150 million, according to the report.

CBRE head of capital markets research and report author, Ben Martin-Henry, said the results reflected Singapore’s GIC increasing its share in Dexus’ Australian Logistics Trust and German investor Deka Immobilien picking up 452 Flinders for around $450 million.

“Sydney and Melbourne remain the preferred cities for capital deployment, having accounted for 44 per cent and 35 per cent of offshore spending respectively,” Martin-Henry said.

Conversely, domestic investors have only acquired $460 million worth of offshore assets in 2020.

“Investment by Australian investors offshore has been very subdued since the highs of the GFC, when many local investors suffered significant losses.

“Interestingly, in the seven years leading up to the GFC, Australian investors deployed circa $65 billion into overseas real estate, however, since then they have spent less than a third of this,” Martin-Henry said.