After a record year in 2021, commercial transactions have slowed, however, Australia still remains an “attractive” market for international investors according to an expert.
Ray White Commercial Head of Research Vanessa Rader said $48.6 billion had been invested in the commercial property sector to the end of August, compared to $96.7 billion over 2021.
“Importantly the flows of capital are at a significant turning point, the big buyer of 2021, REITs (Real Estate Investment Trusts), are retreating rapidly this year, selling more than they are buying,” Ms Rader said.
“While both institutions and offshore players continue to sell down assets, they continue to grow their commitment to Australian commercial property.
“International buyers in particular have growing confidence in our local market, with the USA and Germany being the regions which represented growth in investment this year, while Singapore, China, and Hong Kong have decreased their economic commitment to Australian property significantly.”
Ms Rader said NSW continues to be a popular location for investors.
“NSW was the location of choice to invest in, accounting for 43.3 per cent, its share up 5 per cent on last year’s results,” she said.
“Victoria similarly has increased its holdings on 2021 results, now 27.8 per cent, while markets such as Queensland and WA, which were attractive last year due to their strong population gains, economic growth, and future potential, have now slowed.”
According to Ms Rader, office space is returning to favour.
“Looking at asset classes, the confidence in office assets has returned while industrial sales have now moderated after a standout 2021, while retail, hotels, and medical/aged care have all seen uplift in activity this year too.”
Ms Rader said private buyers will play an important role in commercial real estate headed into next year.
“Capitalising on strong yields and increases to capital returns together with availability of finance, these investors were quick to sell in 2021,” she said.
“While this trend has continued again this year, the extent has been far less.
“As market conditions move, we are likely to see private investors become net purchasers, capitalising on emerging opportunities and stress of owners who may have purchased at peak rates last year.
“Similarly, as bond rates grow, the spreads will become increasingly unsustainable for some property owners, which will benefit the private sector and their ability to move quickly when opportunities present themselves.”