Offshore investors attracted to Australian commercial property despite deteriorating fundamentals: Chart of the week

Despite a deterioration in underlying market conditions over the past 12 months, offshore investors are expected to continue to pour money into Australian commercial property, according to Paul Braddick head of property research at ANZ.

Braddick notes in the June ANZ commercial property update that "tenant demand has weakened, vacancies and incentives have risen and rental growth has slowed, particularly for secondary properties".

"Nonetheless, the global flood of liquidity, a heightened appetite for yield and the recent sharp decline in the Australian dollar are expected to continue to support investor interest in Australian commercial property (although to date offshore demand has been heavily focused on prime properties)," says Braddick.

The following graph demonstrates that offshore investment in Australian office property has not dampened despite a deterioration in demand for office space: