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Who is the biggest foreign player in Australian commercial investment?

By Juliet Helmke
08 February 2024 | 11 minute read
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New research reveals the foreign country that’s spending the most money in Australia’s commercial markets.

According to CBRE, Japanese investors deployed the most offshore capital across the office, industrial, retail, hotel and living sectors in Australia last year.

They trumped buyers from North America, Hong Kong and Singapore, snapping up just over $2 billion in Australian assets over 2023 – a huge increase on the $140 million they put into the market in 2022.

North America was the second biggest source of offshore capital at $1.6 billion, though that represented a 17 per cent year-on-year drop for the cohort.

Hong Kong and Singapore tied for third, with each locality responsible for about $1 billion in sales, though that was a 65 per cent drop from Singaporean buyers.

CBRE’s Australian head of capital markets research, Tom Broderick, gave some insight into the factors that caused Japanese investment to surge over the year.

“Ultra-low interest rates in Japan have given those investors a competitive advantage compared to other countries and Australian groups,” he said.

CBRE revealed that Japanese investors were most active in the living and office sectors in 2023, with some notable deals making significant contributions to the bottom line.

They included Mitsubishi Estate’s investment in Mirvac’s $1.8 billion build-to-rent (BTR) venture and its joint purchase with AsheMorgan of a Sydney office tower located at 60 Margaret Street.

Daiwa House was another major player, teaming up with Lendlease to develop a 45-level BTR tower as the group’s Melbourne Quarter project.

Whether Japan will continue to show the most amount of interest in Australian assets remains to be seen, as CBRE anticipates transaction volumes to be on the rise this year after a dampened 2023.

Taking account of both domestic and offshore investment activity, CBRE reported that national investment volumes dropped by 31 per cent year over year to $24.1 billion in 2023.

“Repricing in some sectors continued to limit deal flows. However, on a positive note, the living and hotels sectors observed an increase in transaction activity, up 39 per cent and 11 per cent respectively, underpinned by strong investment fundamentals,” Mr Broderick said.

But it was the industrial and logistics sector that came out on top of the leaderboard, recording the highest deal flow of any sector in 2023 at $6.3 billion, despite activity falling by 13 per cent over the year.

The office sector, meanwhile, observed a 65 per cent drop in sales volumes in 2023, which CBRE attributed to a lack of consensus on fair value between buyers and vendors. Retail also pulled back by 21 per cent.

Though a high interest rate environment will continue to keep investors cautious in their movements, CBRE’s Pacific head of capital markets, Flint Davidson, noted that positive sentiment was returning.

“The outlook for interest rates in Australia has improved significantly in recent months, with the potential for multiple cuts in 2024. As such, we anticipate an acceleration of investment activity in the second half of this year.”

Who is the biggest foreign player in Australian commercial investment?
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ABOUT THE AUTHOR


Juliet Helmke

Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.

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