Unprecedented offshore buyer activity pushes Australian commercial property sales to $28.4bn in 2015

Record $9bn in retail property changes hands

​Sydney, 6 January 2016 –New CBRE sales data highlights that a total of $28.4 billion in commercial property changed hands in Australia in 2015 fuelled by unprecedented offshore buyer activity.

CBRE’s data takes into account sales of office, industrial and retail property valued at over $5 million. It highlights that 2016 transactions fell just 4% shy of the record $29.6 billion tally set in 2014, with the high level of activity largely attributable to offshore buyers.

CBRE’s Head of Research, Australia, Stephen McNabb, said offshore investors purchased $11.7 billion of commercial real estate, accounting for 41% of overall transaction activity – the highest annual percentage on record. On the flipside, domestic purchases declined by 28%. 

“Rising volumes of offshore investment reflect the relative attractiveness of Australia’s commercial property yields in a period when interest rates have been close to 2% points above major developed markets globally,” Mr McNabb said.

“The level of activity is also consistent with the trend towards globalisation and diversification.  As a result of this, Australian investors are also beginning to export more capital offshore and we may see more of this in 2016, particularly as interest rates rise in overseas markets.”

Offshore investors were particularly active in the Australian office market – acquiring more office towers than domestic buyers for the first time since CBRE began tracking these measurements in 2005.

Overseas buyers accounted for 54% of the annual office turnover and while there was also an increase in offshore investor dispositions net overseas investment in the office sector increased by $3 billion through the year.

CBRE Executive Managing Director, Capital Markets, Mark Granter predicted that momentum would continue into 2017.

“At the beginning of 2014 the expectation was that foreign investment activity might ease however it’s only grown stronger, with the available returns in Australia still more attractive than in the other gateway cities offshore,” Mr Granter said.

“The underlying property fundamentals in Sydney and Melbourne are helping to drive activity as occupier demand improves and vacancies decline, with these markets also benefitting from the fact that not too much new supply is being delivered.”

Turning to the retail sector, CBRE’s data highlights that a record $9 billion in property changed hands last year –up 24% on 2014.

“With trading activity in regional centres declining, the uplift was driven by activity in sub-regional and neighbourhood centres. Sales in these sectors totaled $2.8 billion and $2.5 billion respectively and in both cases this was up by close to $1 billion on prior year levels,” Mr McNabb said.

“Higher transaction volumes for neighbourhood and sub-regional sectors coincided with a circa 40 basis point yield compression through 2015 in these sectors, which suggests investor confidence has been buoyed by the improved retail sales backdrop, stronger tenant demand and the increased opportunity for re-development and expansion.”

The retail sector also saw further offshore investment with an increase in net investment of $1.8 billion through 2015.