Melbourne leads commercial boom as foreign investors step in

Melbourne is the most active commercial market in Australia and the most attractive to offshore investors, according to data compiled by global research house Real Capital Analytics.

RCA estimates that commercial property sales in Australia jumped 127% over the quarter to reach $4.35 billion, with offshore buyers accounting for 42% of the investment capital.

More than half of this investor money has flowed into Melbourne.

According to RCA, the Victorian capital has generated the most deals in offices, hotels and retail sites activity over the past 12 month, while Sydney had a marginally more active industrial market.

RCA calculates that Melbourne has generated $2.56 billion worth of office deals during the past 12 months, compared with $2.46 billion in Sydney and $1.58 billion in Brisbane.

Melbourne is significantly ahead in retail, with deals totalling $1.87 billion over the past 12 months compared with less than $1 billion in Sydney.

And following the sales of major CBD hotels this year, Melbourne has generated $492 million worth of sales in the leisure sector, compared with $394 million generated across all other major markets.

The Sydney industrial market (primarily the outer-western Sydney suburbs) has generated sales of $591 million during the last 12 months, compared with $492 million in Melbourne and $394 million in Brisbane.

Value of commercial activity over the last 12 months

Offices

Value

Retail

Value

Hotels

Value

Industrial

Value

Melbourne

$2.56 bn

Melbourne

$1.87 m

Melbourne

$492 m

Sydney

$591 m

Sydney

$2.46 bn

Sydney

$886 m

All other

$394 m

Melbourne

$492 m

Brisbane

$1.58 bn

Brisbane

$197 m

 

 

Brisbane

$394 m

Source: RCA

According to the research group, offshore funds have been attracted to Australian commercial markets by traditionally higher yields – averaging 8.3% over the quarter – with Singapore investors particurlarly active in Victoria, Queensland and NSW.

Recent noteworthy sales include 469 La Trobe Street, comprising 20,000 square metres of office space, acquired by CIMB TrustCapital Singapore for $84 million in April.

In January Singapore investor Michael Kum added the one-year-old 275-room Travelodge in Melbourne’s Docklands to his hotel portfolio in February for a reported $54 million.

Colliers national director of institutional investment Jon Chomley told AFR offshore buyers were replacing A-REITs as buyers of commercial property.

Chomley says offshore investors are looking for stable economies with good prospects to invest their funds.

Investors view Australia’s commercial sector as an attractive market despite the high Australian dollar and high interest rates.

Furthermore, the Japanese disaster combined with commercial markets in Hong Kong and Singapore at cyclical highs have also contributed to offshore funds flowing into Australian markets rather than to other markets in the Asia Pacific region.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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