Commercial & Industrial Property News Update

Australia - Foreign Investors Flock To Australia For Secure, Quality Investments

July 26, 2012

Australia emerged as the most attractive destination for non-Asian investors in 2011, according to CBRE.

Attracting up to one-third of all foreign funds which came from outside of Asia Pacific, Australia was viewed as the most popular investment destination for non-Asian investors in 2011. Additionally, the country was also the third-most active investment market in Asia Pacific, after Japan and China.

This was announced by CBRE last week, which said that property investment turnover in Australia amounted to AUD 8.35 billion in 2011, behind Japan's AUD 13.2 billion and China's AUD 9.1 billion. Unlike Japan (in which domestic players dominated the market) and China (where the bulk of funds came from Hong Kong), the Australian market received a significant chunk of capital from foreign sources, said Nick Axford, head of Asia Pacific research at CBRE.

"A third of all of the money that has come into Asia Pacific over the last 12 months from outside the region has been focused here in Australia," said Axford. In 2011, 30% of all commercial properties sold in Australia were bought by foreign investors, significantly boosting their presence in the market.

The availability of stable, mature markets such as Sydney helped to draw overseas funds. Prime office buildings in Sydney offer investment yields of around 6%, compared to about 5% yield offered by properties in London or New York, said CBRE.

"Investors are looking for some kind of security. They want good quality products in good liquid markets," Axford said. "We will continue to see investors looking very closely at Australia."

CBRE regional director Robert Sewell said that the increasing scarcity of prime office buildings in Sydney, coupled with increased competition from domestic investors, may see foreign investors looking towards secondary markets instead.

"Last year, we saw REITs selling assets to fund share buybacks. They stopped doing this and now they are acquiring stock," he said. "The focus will be very much in the secondary market."

In order to strengthen their balance sheets and fund buyback of shares, many Australian real estate investment funds (REITs) were seen to divest their assets. Notably, Stocklands sold AUD 795 million worth of assets during H1 2012, mostly office assets.

Tags: Business space, Office for sale, Commercial real estate

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