Commercial real estate tops Chinese investment in Australia in 2015: report

Commercial real estate tops Chinese investment in Australia in 2015: report
Commercial real estate tops Chinese investment in Australia in 2015: report

Chinese investment in Australia returned to positive growth in 2015, with commercial real estate making up for the drop in investment in the mining sector, says a new report by KPMG Australia and the University of Sydney.

The return of the mega deal, with seven investments of $500 million or more during the year, helped propel the total value of investment to US$11.1 billion ($15.09 billion), a 32.9 percent increase on the previous year in US$ terms (or a 59.5 percent increase in AU$).

This was the second highest inflow year for new Chinese investment into Australia, behind the previous peak driven by mining sector investment in 2008, says the latest Demystifying Chinese Investment in Australia, analysing Chinese outbound direct investment into Australia in 2015. 

On an international stage, Australia maintained its position as the second largest recipient of aggregated Chinese direct investment between 2005 and 2015, behind the United States, attracting a cumulative US$78.7 billion during the period.

In Australia, commercial real estate remained dominant for the second year in a row, accounting for 45 percent of the total deal volume. Commercial real estate investment grew to $6.85 billion from $4.37 billion in 2014. NSW attracted 94 percent of this investment, with investors focusing more on long-term development projects.

China Investment Corporation’s $2.45 billion purchase of Investa Office Portfolio was the major deal of the year in this sector.

Commercial real estate tops Chinese investment in Australia in 2015: report

This year’s report also includes new research analysing the sentiment and attitudes of Chinese investors towards the Australian market.

“Following two years of moderately declining Chinese investment, the resurgence of interest and the diversification by Chinese companies in 2015 is a strong endorsement of the attractiveness of Australia’s economy. Alongside continued interest in the NSW and Victorian commercial real estate sectors, there has been activity and major deals in renewables, agribusiness, and for the first time, healthcare,” said report co-author, Doug Ferguson, head of KPMG Australia’s Asia and International Markets.

Professor Hans Hendrischke, Professor of Chinese Business & Management at the University of Sydney Business School commented, “Our research has also shown that, for Chinese companies looking to expand internationally, Australia is seen as a strong first port of call."

The year also saw a lowering of the Foreign Investment Review Board limits for mandatory approval for agricultural land acquisition and the rejection of an application from a Chinese investor to purchase S Kidman & Co – illustrating the sensitive and very public debate over investment in this sector. Nonetheless, Chinese investors are expected to remain strongly interested in Australian agribusiness.

Chinese investment in Australian infrastructure sector continued during the year, with the major deal being the 99-year lease of the Darwin Port to the Landbridge Group for $506 million. The outlook continues to look positive, with Chinese companies attracted to the strong local pipeline of opportunities offering relatively safe returns and a longer term investment horizon for co-operation.

Overall, Chinese investors remain bullish on Australia, with 65 percent saying their 3 year outlook is positive, and 55 percent planning to increase their Australian holdings in 2016.

 

Tags: 
China Australia Commercial Investment

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