Australian commercial real estate investment totalled $11.3 billion during the June 2022 quarter, remaining strong despite interest rates and bond yields moving higher.
According to Cushman and Wakefield research, the June 2022 quarter total helped push rolling annual investment to $52.1 billion, the third strongest figure on record.
National office market investment volumes led the quarter’s tally, with $4.6 billion in reported transactions and up 10% compared with the $4.2 billion reported in Q2 2021.
More than half that total comprised transactions in the Sydney CBD and a quarter in the Melbourne CBD, as demand for office assets remained robust.
The top deals during the quarter included Link REIT entering a joint venture with Oxford Properties for a 49.9% interest in the Investa Gateway Office portfolio for $596 million and Allianz Real Estate purchasing 50% of Commonwealth Bank Place in Sydney for US$445 million from the Abu Dhabi Investment Authority.
Industrial investment volumes for the quarter totalled $2 billion, the third highest quarter on record.
However, the quarterly total was down significantly from the corresponding record Q2 in 2021 of $8.3 billion.
The quarter’s largest transaction was Hines’s acquisition of a four-warehouse portfolio for $212 million from Pipeclay Lawson.
During the quarter, retail sector investment recorded a total of $1.9 billion, 38% higher than $1.4 billion in Q1 2022 but 24% lower than the corresponding quarter in 2021, which totalled $2.5 billion.
Foreign investment into Australian commercial real estate represented 33% of all transactions during the quarter, slightly below the long-run average of 36%.
Hong Kong-based investors led inbound investment totals with $1.5 billion in transactions, followed by Singaporean investors accounting for $1.2 billion.
“Investment volumes across Australian commercial real estate sectors in June remained robust against the backdrop of rising inflation, interest rates and bond yields,” Cushman & Wakefield Australia and New Zealand Managing Director Simon Fenn said.
“While the macroeconomic picture continues to change, this was the second strongest Q2 we’ve seen,” Fenn said.
“The standout was strong demand for office assets in the Sydney and Melbourne CBDs, with investor confidence in the long-term fundamentals remaining in place.”
Cushman & Wakefield’s Head of Research in Australia and New Zealand John Sears said investors were weighing the return dynamics relative to fixed income and the prospect of higher funding costs.
“As a result, we expect to see total returns and the inflation hedging benefits of real estate assets come into even sharper focus, supporting outperformance for higher quality properties,” Sears said.