Sydney leads commercial property boom
Sydney is now the third most popular target globally for commercial property investors, as Australia rides a $28.8 billion boom over the last financial year.
Investment activity across the retail, industrial and office sectors hit record highs during 2014/15, with investment up 19%, according to a Colliers International report.
The Australian Investment Review shows offshore interest in Australian assets grew considerably, with Sydney now ranking behind only London and Manhattan for offshore investment, and ahead of Shanghai and Paris.
The low interest rate environment, the falling Australian dollar and our stable economy have combined to create optimum conditions for Australian commercial property
Of the $28.8 billion invested through both offshore and domestic buyers, $15 billion was poured into the office market, up 7% on the previous year. The industrial market jumped an incredible 56% to $6.45 billion, while $7.541 billion in retail assets were sold – an increase of 26%.
Colliers managing director of capital markets and investment services, John Marasco, says he expects interest and demand in Australian commercial property to remain on the up for some time.
“Transaction volumes across the industry are up, as both offshore and domestic investors demonstrate a continuing strong appetite for Australian commercial property,” Marasco says.
“The low interest rate environment, the falling Australian dollar and our stable economy have combined to create optimum conditions for Australian commercial property. The strong performance of the sector in recent years, and the potential for continuing growth have made more offshore investors consider the Australian market for the first time.”
“At the same time, conditions for domestic investors have also been positive, so together demand for commercial property assets is at an all-time high.”
We see the emergence of Chinese insurance companies into the Australian market as potentially increasing further the volume of capital looking for core and core plus assets
Marasco says he expects a looming influx of Chinese insurers to begin to have a pronounced impact on Australia’s commercial property market, particularly in the office sector.
“Offshore capital looking for investment opportunities in Australia will continue, more broadly, to be the underlying driver of demand and yield compression in our major eastern seaboard markets,” Marasco says.
“While European, South Korean, American and Canadian pension funds are already active in our markets, we see the emergence of Chinese insurance companies into the Australian market as potentially increasing further the volume of capital looking for core and core plus assets.”