Record Foreign Investment in Commercial Property

Despite a tough year for many businesses, Australia recorded a record level of foreign investment in commercial property.
 
According to analysis from CBRE, 2021 saw $16.6 billion in office, retail, industrial and hotel assets changing hands, outstripping the previous record high level of $15.5 billion achieved in 2015.
 
CBRE notes that while many experts predicted closed international borders would hinder international investment in commercial property, the opposite turned out to be true. This is due to many international investors partnering with local fund managers to identify commercial property investment opportunities.
 
In terms of which countries are most actively investing in Australian commercial property assets, North America accounted for the highest share at 39% of all funds invested. North America has been the number one country looking to invest in Australian commercial real estate over the past five years. This year’s level of investment from North America was up sharply from pre-pandemic levels.
 
In second place was Singapore, which contributed 35% of this year's activity, also up on the pre-pandemic average.
 
According to CBRE, some of the major transactions this year involving foreign investors include the $925 million sale of a 50% stake in Grosvenor Place to Blackstone, the $3.8 billion sale of the Milestone industrial portfolio to a partnership between GIC and ESR Australia, the $538.2 million sale of a half stake in Sydney's Queen Victoria Building, The Strand Arcade and The Galeries to a Link REIT/EG Funds partnership and the $315 million of the Sofitel Wentworth Sydney hotel to KKR, Futuro Capital and Marprop.
 
Looking at the different sectors and it has once again been Industrial & Logistics that were the most invested asset class with 44% of total sales. The office sector was closely followed in second place with 43% of total sales.
 
Despite having a tough two years, the retail sector is expected to see renewed interest in 2022 with the reopening of international and state borders and the end of many other restrictions.
 
CBRE expects Australia to continue to see strong international capital inflows into commercial property market next year, with the market being viewed as an attractive proposition given the available returns and the relative strength of the economy compared to parts of Asia, North America, and Europe.
 
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