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Foreign buyers behind half of 2022 commercial property investment

More than half of all commercial property sales in 2022 have been to overseas buyers according to new data from Ray White Commercial.

Cross border sales to foreign buyers accounted for 56 per cent of all commercail transactions in the first quarter of 2022 with investors viewing Australia as a “safe haven”.

Ray White Commercial Head of Research Vanessa Rader said foreign buyer demand had rebounded after accounting for 30 per cent of sales in 2021.

“Offshore buyers continue to grow their investment into Australia (along with institutions who also add to their portfolios) while private buyers continue to dwindle,” Ms Rader said.

“Across Australia this year we have seen 56 per cent of all capital flows into commercial property from foreign sources with 48 per cent representing sellers, a net increase in foreign ownership of eight per cent so far this year.”

In the first quarter of 2022, there was 593 commercial property transactions (more than $2 million) totally $8.69 billion.

The bulk of activity came from NSW followed by Victoria, and together the two states accounted for 74 per cent of all volume.

In NSW, cross-border buyers accounted for 68 per cent of all sales, while in Victoria that fell to 63 per cent.

Offshore sellers also represented 53 per cent and 64 per cent of these sales respectively.

Ms Rader said the influx of foreign money was a trend that had grown over the past decade.

“Over the past 10 years, private buyers, on average, have exited the commercial market by a rate of $2.4 billion per annum,” she said.

“In contrast, cross-border buyers year-on-year continue to increase their foothold in Australian commercial property at an average rate of $4.93 billion per annum, with institutions also increasing averaging $1.22 billion annually.”

Given the relative strength of the Australian economy, Ms Rader said further foreign investment would continue throughout 2022.

“Despite Australia’s inflationary concerns it remains an economic ‘safe haven’ location to invest in,” Ms Rader said.

“The large uptick in overseas interest this year has been clear and with Australia remaining competitive in terms of yield, spreads remain attractive particularly to offshore pension funds and listed vehicles.

“Despite the high vacancy office market, office transactions accounted for the greatest turnover during 1Q 2021 followed by industrial and retail.

“Hotel investment has also come back after a quiet 2021 and is anticipated to see further increases in 2022 notably from Singaporean investors, similarly the development site market may see some rebound after a quiet two year period.”

Ms Rader said Australia had been an attractive option for foreign investors from around the world.

“We continue to see the greatest investment into Australian commercial assets by both United States and Canadian groups together with Asian nations Hong Kong, China, Singapore and South Korea,” she said.

“European nations have also seen the benefits of Australian assets with Germany, Switzerland and France as well as the United Kingdom also growing their portfolio across all asset classes which we expect to continue.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.

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