- According to CBRE, Australia has led Pacific commercial real estate deal activity, with foreign investors pumping in $19.6 billion
- Offshore investors raised the ante in Pacific, accounting for 41 per cent of the $20.8 billion in commercial real estate deals completed in H1
- In Australia, the share of offshore buyer activity was even greater, at 43 per cent, up from 37 per cent at the same period the previous year
- The industrial and logistics sector remains Australia’s most sought-after commercial investment sector, with offshore buyers purchasing $5.4 billion in Pacific assets in H1
Australia has dominated the Pacific transaction activity in the commercial real estate space, with offshore investors pumping in $19.6 billion, according to CBRE.
CBRE’s latest In and Out report found that offshore investors raised the ante in Pacific, accounting for 41 per cent of the $20.8 billion in office, retail, industrial, and hotel property deals completed in H1.
This compares to a 35 per cent share in the first half of 2020, with Singaporean investors leading the push amid increased buyer interest in the region’s industrial and logistics (I&L) sector.
According to report author Tom Broderick, Australia led Pacific transaction activity, accounting for AU$19.6 billion of the AU$20.8 billion in H1 sales.
This was a considerable increase above the $10.8 billion in sales reported at the same time in 2020.
In Australia, the share of offshore buyer activity was even greater, at 43 per cent, up from 37 per cent at the same period the previous year.
“Given the significant impacts brought about by the pandemic, many investors were cautious, resulting in reduced transaction volumes across most sectors in H1 last year,” Mr Broderick said.
“In 2021, sales volumes have doubled, with the relative strength of the COVID-19 response in Australia and New Zealand giving investors’ confidence to return to the market. Both countries’ economies have also rebounded strongly compared with other developed nations across the world, with GDP and the labour market above pre-pandemic levels.”
Mr Broderick noted that Singaporean investors led the charge into Australia, accounting for $4.276 billion of Pacific transaction activity and $4.110 billion of Australian activity – far exceeding the next largest capital source, the United States, which accounted for $1.442 billion of Pacific deals (of which occurred in Australia).
However, US buyers were net sellers, dumping $5.733 billion in Pacific assets and contributing to overall offshore net capital flows throughout the Pacific being -$370 million.
According to the report, I&L remains Australia’s most sought-after commercial investment sector, with offshore buyers purchasing $5.4 billion in Pacific assets in H1 (representing 59 per cent of total I&L sales), including shares in three major portfolios sold in Pacific for a total of $6.3 billion.
Given the competition for big portfolios from offshore organisations, local investors have been more active at the smaller individual asset level, with a particular interest in sale and leaseback options.
According to CBRE, office investment is growing, with $7.8 billion in properties transferred across Pacific in H1, compared to $10.4 billion for the whole year of 2020. Australia accounted for $7.3 billion in H1 sales.
Offshore capital accounted for 36 per cent of total Pacific sales volume in 2018, increasing from 48 per cent in 2020.
This was due in part to international border closures, though the report notes that foreign investors with domestic teams or partnerships remain active, and confidence has returned to the office market, with investors more confident about the effects of flexible working and the flow-on effects to the leasing market.
Following the disruption of 2020, CBRE predicts greater activity in the retail and hospitality sectors in H2 2021.
Retail is still a two-tiered industry, with investors focusing on non-discretionary neighbourhood centres as well as large format retail. As a result, the report found some overseas investors have sold CBD holdings, while local funds have taken advantage of the chance to buy trophy-style projects.
International and rolling domestic border restrictions continue to wreak havoc on the hotel industry. However, there is early signs of improvement, the report found, as the region’s vaccine deployment progresses, which should lead to a better outlook for the industry.