Foreign investment into Australia’s commercial property sector has hit a new annual record of $16.6 billion in 2021 in spite of international border closures.
CBRE research found that North American investors have led the charge, accounting for about 39% of total foreign investment this year.
CBRE Associate Director Tom Broderick said foreign investment in 2021 had outstripped the previous record total of $15.5 billion achieved in 2015.
“Early in the pandemic, the conventional wisdom was that foreign investment would slow due to closed borders and an inability to inspect assets,” Broderick said.
“However, about 66% of the foreign capital deployed in 2021 has been in partnership with a local fund manager, which has bolstered purchaser activity.”
Singaporean investors were the second most active purchaser group this year, representing 35% of this year’s activity.
Major deals involving foreign investors this year include the $925 million sale of a 50% stake in Grosvenor Place to Blackstone and the $3.8 billion sale of the Milestone industrial portfolio to a partnership between GIC and ESR Australia.
There was also the $538.2 million sale of a half stake in Sydney’s Queen Victoria Building, The Strand Arcade and The Galeries to a Link REIT/EG Funds partnership and CapitaLand Integrated Commercial Trust’s (CICT) purchase of two grade-A office buildings in Sydney for $330.7 million.
Offshore Investment by Sector in 2021 (source: CBRE)
“What surprised us was how quickly the industry innovated in regard to acquiring assets during this year’s lockdowns and how overseas capital found a way to compete for available properties, including teaming with local investment partners,” said CBRE’s Pacific head of Capital Markets Mark Coster.
“International capital is expected to play a continued strong role in the commercial property investment market next year, with Australia being viewed as an attractive proposition given the available returns and the relative strength of the economy compared to some parts of Asia, North America and Europe.”
The industrial and logistics sector was the most popular asset class by total value, followed by office assets.
Major portfolio sales such as the Milestone deal and Blackstone’s acquisition last week of a 49% stake in the Dexus Australian Logistics Trust fuelled industrial, logistics and office sales volumes.
“The amount of international capital assessing retail assets has increased significantly during 2021 and we’re also fielding considerable interest in alternative asset classes such as life sciences and data centres,” Coster said.
