Japanese buy up big in Australian commercial property
Japanese investors poured more than $1.6 billion into local commercial real estate last year and their buying is tipped to continue as they seek out higher growth markets.
A new cohort of Japanese companies is seeking out higher growth markets overseas and most are looking for investment-grade stock.
Their spending in 2017 was more than three times their total investment across the previous eight years and agents report their demand is not sated.
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Last month, Tokyo-listed Daibiru picked up the under-construction 275 George St, Sydney, for close to $240 million.
Almost two years ago, Japan’s Mitsubishi and Chinese group Ping An Insurance took an 80% stake in Lendlease’s planned $1.5 billion Circular Quay Tower in Sydney.
Other big plays have included Daisho buying the W Hotel, Melbourne, for $219 million and PA Realty, a venture between Mitsubishi Estate Co and CLSA Real Estate, buying three towers in Melbourne and Sydney.
Real estate agency JLL says Japanese outbound investment has grown steadily over recent years, with most focus on core office assets, hotels and large scale developments. The new wave of investment started in the US but the focus has more recently turned to Australia.
JLL head of international capital for Australia Stuart McCann says there are a “large number” of Japanese groups in the early phases of outbound investment strategies and Australia was a high-priority market.
Many already invest locally via unlisted funds or mandates, but this is tipped to grow.
“Japanese investors are gearing up to build very large real estate exposures in offshore markets; however, they are being very measured in their approach,” McCann says, noting the focus on quality office towers. While office values have jumped in Australia, Japanese property yields are often less than 3% and investors are under pressure not to hold low returning cash in Japan.
Despite the 1980s bubble and crash that wiped out many Japanese investors, Australia is viewed as one the most transparent real estate markets in the world, with strong economic and property fundamentals.
JLL director international capital in Australia Luke Prokuda says the country’s commercial real estate markets also remain “highly attractive”.
This article originally appeared on www.theaustralian.com.au/property.
