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Foreign investment in Australian commercial property doubles

Foreign buyers continue to be active in both buying and selling Australian commercial assets, according to a leading expert.

Ray White Commercial Head of research, Vanessa Rader said foreign investment in commercial property had nearly doubled in the past 12 months.

“The recent release of the FIRB Annual Report for 2020-21 has shown a 95.91 per cent increase over the year in applications to invest in Australian real estate,” Ms Rader said.

“The 862 applications, which represents $82 billion in commercial property, is an opposite trend to what we have seen in the residential market, with $10.4 billion approved down from $17.1 billion the previous year.”

Ms Rader said most investment has been focused on Australia’s largest commercial markets.

“Commercial investment continues to be heavily weighted towards Sydney and Melbourne regions with strong volumes across all sectors notably the office market,” she said.

“The current uncertainty, particularly in CBD office markets, surrounding occupancy and rents is not a deterrent for these buyers who consider the yields on offer still competitive compared to other international markets, while the security and vibrancy of our global cities is a strong indicator of confidence and future growth.

“Greater interest in the Queensland market has come off the back of strong population gains notably in SEQ while the announcement of the Olympics in 2032 will do much to raise the profile of the state in coming years and draw greater interest.”

According to Ms Rader, the countries seeking to invest in Australia have seen some changes.

“While the USA remains the greatest investor followed by Singapore, we have seen Germany grow their interest after a number of years in hiatus notably in the office and industrial sectors,” she said.

“Large pension funds continue to see Canada as a key investor into Australian real estate while China has moved down the list during this year which has been largely influenced by a reduction in FIRB development applications in Australia as well as a halt to international students and migration which in the past has grown real estate sales (albeit residential). 

“Looking at recent transactions in the early part of 2022 we can see that buyers from Asia have come back with Singapore, Hong Kong and Japan growing their interest while USA, Canada and European buyers continue to transact.”

Ms Rader said she expects investment activity to remain strong for the rest of the year, with the upcoming election not impacting sentiment.

“The abundance of cash rich investors and larger trusts, funds, as well as offshore buyers’ deep pockets, will see the continued strong investment into commercial property this year,” she said.

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Rowan Crosby

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