Australia Inundated by Wave of Foreign Investors – 22 Des 2011


FOREIGN investors have bought $3.7 billion worth of commercial property this year, accounting for 37% of transactions, according to CBRE.

According to CBRE this is the highest level of offshore investment by share and absolute terms in almost 20 years.

All sales over $AU20 million shows $AU9.8 billion worth of properties changed hands in 2011 up 13% than the previous year, of which foreign investors accounted for $3.7 billion.

CBRE global research and consulting executive director Kevin Stanley said the share of foreign investment in Australia had increased every quarter in 2011.

In Q1 it was just 4.0%, however this stepped up to 34% as the market bounced back in Q2, before increasing again to 41% in Q3. As at December 16 the Q4 share of sales was a high 44%.

Stanley said there are many motivators, all working together at present.

“Australian yields remain high by global standards, kept that way ultimately by the high local cost of debt and the limit this places on bidding from domestic investors. Add to that the search for an economy with a half-decent outlook and an ease in doing property business and Australia is an obvious choice for global investors,” he added.

According to CBRE international investments senior managing director Rick Butler, the biggest players were from Asia, which accounted for 51% of offshore buyers and 19% of total transactions for the year.

The push was led by fund managers and sovereign wealth funds working out of Singapore.

“The fast growth in savings in Asia has fuelled activity as investors adopt global investment strategies to diversify risk. Australia is high on the list of priority destinations as highlighted by major transactions this year, among them the $AU395 million purchase of 259 George St, Sydney by Singaporean-based private investor Memo Corp and the $AU185 million sale of 20 Bridge St, Sydney to the Hong Kong-based RREEF.

“In general terms, most foreign purchasers who come into the market have utilised all equity and Credit Suisse’s purchase of 55 Elizabeth St, Brisbane for $AU165.5 million is a good example of this,” Butler said.

Pension funds also been active, Pramerica and South Korea’s National Pension Service bought 595 Collins St, Melbourne whilst Abacus and the NPS bought 32 Walker St, North Sydney, for $AU130 million and $AU35.6 million respectively.

Butler said another interesting transaction was the $AU84 million sale of 140 Sussex St, Sydney to a client of RREEF, with the ultimate investor mandate being the first German pension fund to buy directly in Australia. In one of the most recent deals, 20 Bridge St was ultimately purchased by Pension Fund Capital via RREEF.

Outside of Asia, German investors were the most active, accounting for just 10% of offshore activity, as concerns closer to home limited global acquisitions.

Meanwhile domestic players started to enter the fray towards the end of year, according to Stanley. But they were behind the foreigners, accounting for 21% of deals.

Some noted deals include:

· The $AU310 million 50% purchase of the QV1 office building in Perth by superannuation fund Australian Reward Alliance.

· 452 Flinders St, Melbourne for $201.5 million by the DEXUS Property Wholesale Fund.

CBRE found office property continues to dominate, making up the lion share, 64% of all transactions. Stanley said this is because the outlook for growth in rents and values, especially for the best quality properties, remains bright.

This was followed by the retail sector with 24% of transactions and industrial property with 11%.

Meanwhile New South Wales was the preferred destination (32%), followed by Victoria (25%), and Queensland and Western Australian accounted for 20% and 10% respectively. This distribution is broadly in line with 2010.

Stanley said despite the uncertainties of 2012, investment demand appears to be continuing to run at a high level for quality Australian real estate.

He predicts demand from offshore parties will continue to run at a high level.

“Ironically the only potential threat would be if values were to continue to fall in the larger markets of the UK and Europe. This would likely attract global capital to these places at the expense of Australia.

“However, with domestic investors now starting to become more active, the biggest constraint on investment activity in the year ahead was likely to be the regular complaint of major investors; the availability of suitable properties on the market,” Stanley concluded.

Source: – 22nd December 2011

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