Fast Global Capital Sweeps into Aussie Market

The slow and patient capital of Japan has found a firm toehold in Australian assets in the past 24 months, but this could be about to change. Daibiru Corporation snapped up the biggest office transaction of the first quarter of 2025, splashing $600 million on a Sydney office block. The deal with Investa was struck on a 6 per cent yield for the A-grade 135 King Street in the nation’s economic engine room. However, it could be one of the last big investments from Japan for the year ahead as fast global capital enters the fray, according to Colliers Asia-Pacific capital markets managing director Chris Pilgrim. “We’re seeing a strong shift towards office as an asset class again,” Pilgrim says. “Volumes have definitely increased, there is more capital coming back into the global and APAC real estate markets.” Australia fourth most-invested market But the nature of that capital is changing, according to Pilgrim. “Something like 80 per cent of Japanese outbound capital went to Australia last year,” he says. “It’s been a really strong market for the Japanese investors … Australia was the fourth-most-invested market last year globally for international capital. “Australia has really driven forward, and historically Japan is not usually a top-10 capital source for real estate.” ▲ Daibiru Australia bought a 50 per cent stake in 135 King Street from Brookfield Asset Management. Pilgrim says Australia has been the beneficiary of Japan’s outbound capital in the past two years, but the tide may turn in 2025. “I think there is still more Japanese capital that would like to find a home in Australia, but the challenge with some of that is Japanese capital can be slow to the point,” he says. “And as the markets rebound and some normality comes back to the transaction process, it may be that they’re just not able to compete on a timeframe level. Particularly when there’s more competitive capital coming into the market from Hong Kong, Singapore and of course domestically.” Singapore capital eyes Aussie assets Pilgrim says a “deep pool of high net worth of private family office money” in Singapore are now looking at the next five-year cycle and development and pure investment opportunities in Australia. Colliers international capital lead Lucy Mallick says while big institutions are very active at the moment, listed vehicles and high-net-worth families are also stepping in. “There have been some really interesting groups re-enter the market where they might not have been as active in the last couple of years,” Mallick says. The recent 388 George Street ( pictured top ) transaction points to Singaporean investors re-entering the market in a meaningful way, according to Mallick. UOL acquired a 50 per cent stake in the A-grade Sydney office tower for $285 million from Canadian Brookfield Asset Management to co-own the building with Investa. While the deal was struck late last year, it demonstrates the strong fundamentals and high conviction underpinning transactions in Sydney’s CBD, and the broader APAC region, according to Colliers’ Chris Pilgrim. “Within APAC in the last 24 months there has been about $US183 billion deployed across the region across the six main asset classes,” Pilgrim says. “I think the unusual trend in APAC right now compared to Europe and America is that office is still the most invested asset class. “So of that $US183 billion, $US57 billion was in office.” ▲ Colliers managing director of Asia-Pacific capital markets Chris Pilgrim. In contrast, Pilgrim says, across Europe and America logistics was the top asset class. Industrial and logistics remained a close second in APAC. Institutional and private investors are looking closely at office markets and realising that the supply coming through in the next five years is “really thin”. “Within APAC there are more challenges within the region to invest as a market. For a lot of cross-border and international capital China is still a challenging market to deploy capital into and almost by association Hong Kong too. “The two dominant markets, even more so than last year, are Japan and Australia. We will see more global capital being deployed into both those markets, because they have a deeper pool of assets in a mature market.” Global investors rebalance portfolios Industrial remains the hottest pick for global investors, and Pilgrim says this is partly because the asset class has matured and diversified to include cold storage, last-mile logistics and data centres. “It’s more about diversifying and rebalancing portfolios as well,” Pilgrim says. Mallick says while office remains the top Australian asset class for investment, hotels are also in favour. “Increasingly high-net-worth families in Singapore are very interested in that initial direct deployment into Australia particularly,” she says. “Those drivers are often office sector, living sector and hotels. ▲ Colliers international capital lead Lucy Mallick. “I think hotels are an interesting one because they benefit from a lot of the thematics we see playing out in the living sector, population growth and income growth. But it’s appealing because you’re working with hotel management platforms so there is less day-to-day management. “Appetite for development risk is pretty skinny at this point in time, so there are more conversations around what can we do from an existing assets perspective.” When deals will be done Pilgrim says Australia’s office sector is ripe for investment, if vendors are willing to sell. “One of the biggest challenges we have is we’ve had two years where purchasers haven’t been able to get to the right prices for vendors. “We’re now in that slightly counter-view now where vendors who have all been through a relatively challenging time in terms of pricing revaluations and looking at loan-to-value ratios and debt ratios with banks, they’ve actually done very well to hold on to their assets over the last few years. “But now there’s that view that we’re at the bottom of the cycle, and is that the right time for them to sell.” Pilgrim believes there will be another two quarters of pricing discovery but by the end of this year he believes that the “deals will be getting done” in Australia and across the broader APAC region.

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