New CBRE sales data highlights that a total of $28.4 billion in commercial property changed hands 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 per cent shy of the record $29.6 billion tally set in 2014, with 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 per cent of overall transaction activity - the highest annual percentage on record. On the flipside, domestic purchases declined by 28 per cent.
"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 percentage 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 is 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 per cent 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 per cent 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 totalled $2.8 billion and $2.5 billion respectively and in both cases these 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.
In the industrial sector, annual sales dipped by 15 per cent to $4.5 billion, however CBRE Senior Manager, Industrial & Logistics, Matt Haddon said it was a matter of timing rather than any slowing in activity.
"2015 was probably even more active than 2014, however a number of very large deals failed to exchange just before Christmas and will now fall into the first quarter of 2016. We estimate that there could be $2 billion+ of unrecorded deals agreed in 2015 that sit within this category," Mr Haddon said.
