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Foreign investment into Australian commercial property hits record high in 2021: CBRE

Commercial, Economy
15 December 2021 14:54 (AEST)

Commercial retail properties for lease in Melbourne. Source: Sipa USA/Reuters

New data from real estate investment firm CBRE shows that foreign investment in Australian commercial property topped a record $16.6 billion over 2021.

International border closures may have kept tourists out of the country, but they posed “no barrier” to foreign investment into office, retail, industrial, and hotel assets over 2021, according to CBRE.

The report found North American investors by and large led the invigorated investment activity, accounting for roughly 39 per cent of total investment into Australian commercial property. For reference, North American investors accounted for around 26 per cent of foreign investment over the five years before the pandemic began.

Singaporean investors were the second most active purchaser group in 2021, coming in just behind North America and accounting for 35 per cent of all foreign investment activity into Australian commercial property.

CBRE Associate Director Tom Broderick said 2021 foreign investment outstripped the previous record of $15.5 billion from back 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,” Mr Broderick said.

“However, about 66 per cent of foreign capital deployed in 2021 has been in partnership with a local fund manager, which has bolstered purchaser activity.”

Some of the biggest transactions involving foreign investors over 2021 included the landmark $925 million sale of a 50 per cent stake in Dexus’ (DXS) Grosvenor Place building in Sydney to New York-based investment firm Blackstone.

2021 also saw a GIC and ESR Australia joint venture entity purchase Blackstone’s $3.8 billion Milestone property portfolio — marking the largest-ever property transaction in Australia.

CBRE Pacific’s head of Capital Markets, Mark Coster, said it was particularly surprising how foreign investors managed to find a way to compete for available properties given Australia’s border closure and the lockdowns that plagued many parts of the nation throughout the year.

“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,” Mr Coster said.

On a sector-by-sector basis, industrial and office properties accounted for the bulk of foreign investment at 44 per cent and 43 per cent, respectively. Hotels accounted for 8 per cent of foreign investment, and retail properties for 5 per cent.

Mr Coster said looking ahead, there could be a potential positive shift in demand for retail properties in 2022.

“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,” he said.

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