Inflation woes and a looming election are doing little to dampen foreign buyers' enthusiasm
Commercial assets are still drawing foreign investors, who continue to actively buy and sell despite the emergence of headwinds like global inflation and the upcoming federal election.
New data from the Foreign Investment Review Board’s annual report for 2020-21 revealed a 95.91% spike in applications to invest in Australian commercial real estate over the year. The number of approvals granted nearly doubled to 862 from 440 the year prior, The Australian reported. That represents $82 billion in commercial transactions, up from $32.87 billion the year prior. It’s in direct opposition to the trend in the residential market, which saw $10.4 billion approved – down from $17.1 billion the prior year.
The United States committed the highest amount in Australian commercial assets at $20.8 billion, The Australian reported. It was followed by Singapore ($13.8 billion), Germany ($7.6 billion), Canada ($7.4 billion) and China ($6.3 billion).
Investors are focusing on passive property assets rather than the development deals that dominated the space when large companies were opening Australian branches and creating new stock.
Vanessa Rader, head of research at Ray White, told The Australian that the majority of recent purchases have been existing property rather than newly developed products. Rader expected looming interest rate hikes to quell activity among some groups, particularly smaller investors and self-managed super fund buyers.
“While this smaller end of the market may see a period of moderation back to more normalised levels of activity, the abundance of cash-rich investors and larger trusts, funds, as well as offshore buyers’ deep pockets, will see continued strong investment into commercial property this year,” she said.
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Commercial investment was largely concentrated in the Sydney and Melbourne markets across all property types, The Australian reported. There was a particular focus on offices, with few signs that foreign investors are worried about the uncertainty around CBDs and remote work.
Rader said this could be due to the attractive yields compared to other international markets, along with strong prospects of future growth.
There has also been greater interest in the Queensland market thanks to strong population growth, as well as the announcement of the Olympics in 2032, The Australian reported.
