Offshore investors rate Australia a good-looking option

Australia is the second most attractive country for Asia Pacific investors – coming in behind China and ahead of Japan, India and Indonesia.

Sydney and Melbourne are second and third – behind Tokyo and Shanghai – as most preferred cities for investment.

CBRE’s first Asia Pacific Investor Intentions Survey also found most investors expect to spend more money in the market this year than in 2013.

Australia’s industrial and logistics sector was the most attractive country sector for investors, ahead of China’s industrial and logistics, Japan’s offices and Australia’s retail sectors.

CBRE’s Australian Head of Research Stephen McNabb says there are some key messages for the Australian market.

“Not inconsistent with our current read on the market, the results show that Australia still ranks highly in terms of cross border investment attractiveness,” McNabb says.
While the survey shows Australia is number two in terms of attractiveness to investors, it ranked number one on actual investment last year – making up 35% of cross border investment.

McNabb says this suggests the flow of foreign capital into the Australian market could slow in 2014 as we compete with China and other regions.

“We expect a slowing – not an exodus – in capital inflows,” he says.

“This is consistent with our view that demand for AUD assets falls relative to improving growth stories globally, the outcome of which has been reflected in a lower AUD over the past six months or so.”

The survey found most investors were keen on gateway cities, with about one-fifth – 18% – putting Sydney on top of their list, followed by Tokyo and Shanghai.

Sydney ranks high thanks to “the attractive yields on offer and relatively high availability of quality office product”, according to the survey.

McNabb isn’t surprised that it’s Australia’s industrial and logistics sector identified as most attractive.

“This is consistent with our local expectations that the cyclical economic recovery will assist industrial assets which are starting with a higher yield and potential for an improved rent trajectory compared to office assets in the short term,” he says.

But the survey found investors do have some concerns; economic slowdown or weakness is the biggest for 23% of respondents.

Other concerns are the perception that property has become overpriced (21%) and the effects of US tapering and rising interest rates (17%).

The CBRE Asia Pacific Investor Intentions Survey was carried out online from 27 January-24 February 2014 and received a total of 122 responses. Fund/asset managers accounted for 43% of respondents followed by listed property companies (11%) and private equity firms/venture capital (11%). A further 8% of respondents were pension funds, insurance companies and sovereign wealth funds.