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For the first time in history, private investors are the largest cohort of buyers in Australian commercial property.
Knight Frank’s latest The Wealth Report for 2024 has revealed that a massive 42.2 per cent of total investment in Australian commercial property over 2023 originated from private capital.
With a total of $14.8 billion invested in the Australian commercial market, this is the largest share of private capital investment on record.
Cross-border investment was also strong in Australia in 2023, with the country ranking seventh in regards to cross-border commercial transactions, behind the US, the UK, Canada, Germany, Japan and the Chinese mainland.
Knight Frank noted the significance of this trend given the overall decline in commercial property investment, with investment rates nearly halving since 2022.
Ben Burston, Knight Frank Australia’s chief economist, explained that “in a quiet market, private investors took centre stage in 2023, taking a record share of overall transactions volumes in Australia and globally”.
He continued: “While major institutional and cross-border investors have taken a step back for the time being on account of high debt costs and protracted uncertainty over the outlook, private investors tend to be less reliant on debt and more opportunistic in focus, and this has enabled them to be more active.
While industrial and logistics topped the preference list for overall commercial investment globally, private investors’ tastes leaned in a different direction.
According to the Knight Frank report, private investors favoured living sector investments, such as build-to-rent and student accommodation. Hot on its heels were industrial and logistics, and office investments.
Looking forward into 2024, Knight Frank remains optimistic about the commercial investment outlook on both a domestic and an international scale.
A global survey of respondents saw 19 per cent stated they are looking to invest directly in commercial real estate in 2024, especially those located in the Middle East and Asia.
The living sector and healthcare are particularly popular with private investors, especially those in Europe, the Middle East, North America and Asia.
Justin Bond, Knight Frank Australia’s national head of capital markets, revealed that “with interest rates expected to remain elevated globally into the second half of 2024, we anticipate private capital to remain active”.
“In Australia, we also see interest from institutional capital from Singapore, Japan and some parts of Europe, with the expectation of increased transactional activity in the latter part of 2024,” Mr Bond said.
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