Australia at No. 6 globally for commercial real estate investment: Cushman & Wakefield
Australian commercial property is seen as highly attractive by global investors with a total of $18.2 billion targeting Australia, owing to their high yields, stable economic outlook and open and transparent market, according to recent research.
Australia is the world’s sixth most popular destination for investment capital in 2017, behind the US, China, UK, Japan and Germany, according to the latest Great Wall of Money Report by real estate firm Cushman & Wakefield.
The report tracks the amount of newly raised capital, including debt and equity, targeting real estate at a global level. The total global wall of money has fallen by 2 percent compared with 2016, the first drop since 2011 but current levels are still the second highest on record, it says.
Adjusted for investable market size, Australia is number second behind Sweden, said James Quigley, head of Capital Markets, Australia and New Zealand.
“Our comparatively high yields, stable economic outlook and open and transparent market help to ensure our commercial property is highly attractive to global investors,” he said.
While the total amount of available capital fell slightly, the amount of new equity raised increased by 5 percent over the past year. The overall decline is a function of reduced debt availability as a result of regulatory changes, lower gearing and currency movements.
For APAC, available equity increased by 1 percent since 2016, whereas in Australia this rose by 8 percent, up from $16.8 billion in the last year highlighting the relative attraction of the country as an investment destination. This builds on a substantial increase in the prior year, with capital targeting Australia up 20 percent from $15.1 billion since 2015.
“The data highlights the relatively advanced state of the global CRE cycle and the difficulty of finding assets that meet return criteria. While available capital remains high, fund raising activities have slowed as investors focus on deploying existing capital,” said Dominic Brown, head of Research, Australian & New Zealand.
In Australia, Q1 investment volume (as at March 9) is already nearly $5 billion, and remains on track to deliver the highest first quarter total since the $5.2 billion recorded in Q1 2011.
This follows from a strong volume recorded in Q4 2016 of $9.7 billion. Of the total investment to date in the March quarter, foreign investment remained robust representing 52 percent of the overall transaction volume.
While New South Wales was the top destination for investment during 2016 of all states and territories with 37 percent of overall volume, Victoria and Queensland stand as the most traded destinations so far during the current quarter. During Q1 the most active purchasers have been unlisted funds, with unlisted funds and REITs the largest sellers.
“Demand for Australian CRE remains strong, though limited stock availability in 2016 caused Australian office and retail property transaction volumes to fall.” However, transaction volumes are expected to increase in 2017,” Dominic Brown said.
James Quigley added that “more stock is likely to come market as institutional owners look to dispose of non-core assets and more active traders offer repositioned assets for sale as they seek new opportunities”.
Turnover is also expected to increase in the Sydney CBD where Quigley estimates over $2 billion in stock is likely to come to market.