Foreign investor interest in Australian commercial property at pre-GFC highs: CBRE
The prospect of securing high-yielding investments in a mature, transparent and liquid real estate market is drawing foreign investors to the Australian commercial property market.
According to CBRE head of research for Australia Stephen McNabb, foreign investor interest in Australian is now stronger than it was pre-GFC, underpinned by property yields which remain globally competitive.
At a commercial property market outlook breakfast today in Melbourne, McNabb presented the following slide in his presentation showing regional retail yields (6.1%), prime office yields (7.4%) as well as industrial grade property yields (8.3%) as well as capital growth prospects for these three asset classes - all of which are attractive to foreign investors.
Click to enlarge
McNabb says industrial property is a category in which yields had started to "re-rate for higher growth above long term averages amid increasing logistics demand".
“This may reflect a structural shift in the growth in internet retailing and its transformation of parts of the delivery chain which is driving demand in the industrial sector.
“While traditional retailers are gradually losing out to online sales, this is shifting activity between the retail and industrial sectors, with logistics the key driver. That said, at a national level we are also seeing a modest recovery in ‘traditional’ retail volumes, albeit at a lower rate of growth than historically and this is also driving the flow of goods around markets,” he said.
McNabb was joined at the breakfast by Dr. Nick Axford, CBRE’s head of Asia Pacific research, who said that despite the relatively high cost of finance and the perceived currency risk, “Australia remains attractive to investors – largely because it is a mature, transparent, liquid real estate market where pricing looks attractive relative to the very low yields prevailing elsewhere in the world”.
He noted that investors continue to target the real estate sector with investment activity across Asia Pacific continuing to rise and with Australia just one of the markets that has seen increased levels of demand.
And while investors based outside Asia Pacific had generally been selling more property in the region than they had been buying, he says there is a clear distinction between Asia Pacific as a whole, and the Pacific region, where there has been "a steady rise in investment from outside the region – and a significant uptick over the past six to nine months".
"Over the year to December 2012, Australia was the most active investment market in Asia Pacific, and was the most popular port of call for investors outside the region," he said.