Foreign Investment Doubles in Australian Commercial Property
Foreign buyers are continuing to look to Australia for opportunities in commercial real estate, with investment doubling in the past 12 months.
The release of the FIRB Annual Report for 2020–21 has shown a 95.91 per cent increase over the year in applications to invest in Australian real estate.
The 862 applications representing $82 billion in commercial property, demonstrates an opposite trend to what we have seen in the residential market, with $10.4 billion approved – down from $17.1 billion the previous year.
Ray White Commercial Head of Research, Vanessa Rader, said investment is still focused on Australia’s largest cities. “Commercial investment continues to be heavily weighted towards Sydney and Melbourne regions with strong volumes across all sectors, notably the office market,” Ms Rader said.
“The current uncertainty, particularly in CBD office markets, surrounding occupancy and rents is not a deterrent for these buyers who consider the yields on offer still competitive compared to other international markets, while the security and vibrancy of our global cities is a strong indicator of confidence and future growth.
“Greater interest in the Queensland market has come off the back of strong population gains, notably in SEQ, while the announcement of the Olympics in 2032 will do much to raise the profile of the state in coming years and draw greater interest.”
Ms Rader said the countries seeking real estate investment in Australia have seen some changes over the past 12 months. “USA, Canada, Singapore, China and UK historically have been big investors however this profile has seen some reweighting,” she said.
“While the USA remains the greatest investor followed by Singapore, we have seen Germany grow their interest after a number of years in hiatus, notably in the office and industrial sectors.
“Large pension funds continue to see Canada as a key investor into Australian real estate while China has moved down the list during this year, which has been largely influenced by a reduction in FIRB development applications in Australia as well as a halt to international students and migration which in the past has grown real estate sales (albeit residential).
“Looking at recent transactions in the early part of 2022 we can see that buyers from Asia have come back with Singapore, Hong Kong and Japan growing their interest while USA, Canada and European buyers continue to transact.”
According to Ms Rader the upcoming Federal Election hasn’t scared off investors with buyers and sellers still very active in the commercial market.
“With a short lead up time to the recently announced Federal election on May 21, the uncertainty which often precedes elections is yet to appear across the commercial markets,” she said.
“Over the coming weeks we will hear more about the economy, inflation, and all things recovery in a post COVID-19 environment; none of which has brought hesitation by buyers and sellers to transact in the commercial real estate market.”