Sydney a top pick for global institutional investors

Despite challenges in commercial leasing markets, COVID-19 has not negatively impacted investment decision making and there is still no shortage of global capital wanting to buy commercial property.

The annual Investment Intentions Survey – undertaken by the Asian Association for Investors for Non-Listed Real Estate Vehicles (ANREV), the European Association for Investors in Non-listed Real Estate Vehicles (INREV) and the Pension Real Estate Association (PREA) in the US – showed little change in investment decisions compared to 2019.

A noticeable difference was the attitude to risk with core property in much higher demand. Despite some very big challenges expected in 2021 in the office sector, it remained the most desirable property type along with industrial/logistics and residential.

Offices remained one of the most desirable commercial property types in 2020. Picture: Getty.

Retail continued to slip out of the top four preferred investment types, being overtaken by development sites.

Interestingly, Australia’s commercial property became even more popular with overseas investors looking at Asia Pacific.

According to the survey, Sydney is now the number one choice for institutional investors in 2021, followed by Melbourne. A staggering 84% of respondents said they were planning to buy office properties in these cities, with 100% of US investors saying they plan to invest in these cities.

This is despite office rents dropping by more than 10% in both cities on the back of rising incentives to occupiers, and vacancy rates continuing to creep up.

A key feature of all property markets in 2020 was weak leasing demand but no shortage of cash to buy, which has pushed up pricing.