Offshore Investment In Australian Commercial Property At New Highs

Offshore investors dominated commercial property sales activity in Australia in Q3, snapping up over half of the $8.6 billion in property traded during the period according to new CBRE data.

CBRE’s sales analysis takes into account sales of retail, industrial and office property valued at over $5 million.

It shows that offshore buyers accounted for 56 per cent of total sales, by value, during the quarter - the highest proportion recorded in the ten years of record keeping by CBRE.

CBRE’s Head of Research, Australia, Stephen McNabb said the high level of overseas purchasing activity had pushed total sales in the quarter 8.5% higher than the corresponding quarter last year.

“Given the current level of transaction activity we are on pace to reach the record $29.6 billion in annual sales recorded during 2014,” Mr McNabb said.

“The major source of new capital has been China, with Australia attracting close to 25 per cent of the US$6.5 billion in Chinese investment capital released into global real estate markets in the first half of this year.”

CBRE Executive Managing Director, Capital Markets, Mark Granter said the surge of Chinese capital had been initially driven by private investors and developers but was now being also propelled by major institutional investors.

“As expected, we are starting to see the larger Chinese life insurers target opportunities here as they look at geographic diversification to balance their investment portfolios,” Mr Granter said.

“These investors are targeting major gateway cities, with Sydney and Melbourne being high on the radar alongside destinations such as New York, London and Singapore.”

Major Australian acquisitions in Q3 include the $2.5 billion purchase of the Investa portfolio by China Investment Corporation.

Singapore’s Ascendas Real Estate Investment Trust was another significant investor during the period, having snapped up a portfolio of 26 logistics properties from GIC in a deal valued at $1.01 billion.

Mr McNabb noted that net investment position of offshore investors continued to grow and now totalled $24 billion since 2006.

However, he also highlighted that a number of the larger offshore transactions in Q3 – such as that of the GIC portfolio – also involved sales by existing offshore owners.

“It wouldn’t be surprising to see some offshore investors with high existing weightings to Australia looking to recycle capital into other global markets as opportunities evolve in the rest of the world. However, at the same time, there is new capital being unlocked from Asia with zero or low weighting to Australia, which should continue to support the net offshore investment picture in the coming year, at least.“