Australian Commercial Property Transaction Activity Moderates After Record Year

Commercial property transaction activity has moderated in Australia following record capital flows last year. CBRE’s new Australia In & Out report highlights that circa $15.2 billion in industrial, office, retail and hotel assets changed hands in H1 2022, down from $23.8 billion in the corresponding period last year. 

A lesser number of major industrial & logistics (I&L) portfolio transactions was one of the key drivers, with I&L volumes dropping from $10.6 billion to $3.5 billion. 

This followed a signification number of major deals in early 2021, including ESR Australia’s record-breaking $3.8 billion purchase of the Milestone logistics property portfolio from Blackstone; the sale of a 90 per cent stake in the Fife industrial and logistics portfolio to PGIM Real Estate and Manulife for $850 million; and the circa $1.67 billion Moorebank Logistics Park sale. 

 

H1 Volumes by Sector and Offshore Investment % 

Office transactions topped H1 2022 activity, tallying circa $6.3 billion, followed by retail transactions at $4.7 billion (+11% on H1 2021). 
 
Mark Coster, CBRE’s Head of Capital Markets, Pacific, noted, “The decline in the overall sales volume in the first half is not a reflection of the market or investor interest. We saw significant trading in 2021 so it’s natural to expect market activity to decline year on year. We continue to see strong investor interest, albeit at pricing reflective of the changing dynamics in the market around rental growth, differing risks across the asset classes and the cost of debt, which has moved upwards over the past quarter.” 
 
Offshore investment accounted for 26% of transactions volumes in H1 2022, down from 35% in the same period last year. 
 
CBRE’s Australian Head of Capital Markets Research Tom Broderick said, “Hong Kong investors have led investment activity, accounting for circa $1.3 billion in acquisitions in 2022. Investors from Hong Kong appear to be diversifying their portfolios with Australia being a key destination. In fact, since 2020, Australia has been the 2nd most popular destination globally, behind only Mainland China, for Hong Kong outbound capital investing in commercial real estate.” 
 
The other top sources of offshore capital into Australia were Singapore ($1.2 billion), the US ($500 million), Germany ($460 million) and Korea ($320 million).