Sydney Leaps into Top Five Investment Destinations

Sydney has leap-frogged other traditional powerhouse markets to secure a spot among Asia Pacific’s top five preferred destinations for cross-border commercial real estate investment.

It has jumped from eighth to fourth place in CBRE’s annual Asia Pacific Investor Intentions Survey, ranking it above the major cities of Beijing, Hong Kong and Seoul.

For the third consecutive year, Tokyo has maintained its investor appeal and stranglehold on the top spot followed by Shanghai and Singapore.

“Sydney’s resurgence has been driven by improving office fundamentals, with declining incentives set to spur effective rental growth,” CBRE’s Pacific head of capital markets Mark Coster said.

“An undersupplied logistics sector struggling to meet rising e-commerce demand has been another draw for investors eyeing Sydney investment opportunities.”

He said the survey responses pointed to Asia Pacific commercial real estate turnover increasing by 5 per cent to 10 per cent this year, with Australia being close to the upper end of the range.

Coinciding with the latest rankings, Taiwanese-backed investor and developer Shayher Group has already shifted its gaze with a $199-million acquisition of Sydney CBD office tower.

It has purchased 10 Barrack Street—a 13-level, A-grade office tower with a net lettable area of 9627sq m and weighted average lease expiry of 3.5 years— from US-based AEW Capital Management, which paid $138 million for it in 2017.

The building recently underwent a $7.8-million renovation and now holds a 5-star NABERS Energy rating, 4.5-star NABERS Water rating and is certified carbon neutral.

CBRE’s James Parry, who negotiated the deal with colleague Flint Davidson in conjunction with Cushman & Wakefield’s Josh Cullen and Mark Hansen, said local and offshore privates and institutions were increasingly battling it out for safe haven investments in Australia’s biggest capital city.

“There is substantial buyer interest for well-located Sydney CBD office assets, with the continued strength in the leasing market underpinning strong pricing outcomes,” he said.

Hansen said 10 Barrack Street attracted significant inquiry from local and offshore investors drawn to its prime location, proximity to public transport and rare 1040sq m CBD lot size.

“The successful outcome is evidence of the Sydney CBD’s strong office leasing performance, with 10 Barrack proving resilient throughout Covid-19, a testament not only to the refurbishment completed by AEW but 10 Barrack Street’s highly coveted position in the market,” he said.

According to CBRE’s latest Asia Pacific investor intentions survey, logistics continues to be the preferred Asia Pacific investment sector (36 per cent) but more investors are shifting their focus to office assets (31 per cent in 2022 compared to 26 per cent previously) with a view that demand for office space will rise by 10 per cent over the next three years.

Among alternative assets, data centres continue to be the top focus (41 per cent), while demand for cold-storage (35per cent) and healthcare (31 per cent) is expected to strengthen further.

The survey of 535 Asia Pacific-based investors also indicated that more investors (56 per cent) have adopted or are integrating environmental, social and governance (ESG) criteria into their investments, including prioritising the purchase of buildings with green certification and retrofitting existing properties to enhance resource efficiency.