Offshore Investors Drive Red-Hot Commercial Market

Overseas investors have created a record commercial property deal increase of 69 per cent in 2021.

According to the latest Australian Capital Trends report from Real Capital Analytics, commercial property sales skyrocketed to a new annual record of $70.8 billion—the highest the figure has been since 2015.

Overseas investors mostly looked to the industrial property market where two of the biggest deals involved two offshore firms: New York’s Blackstone and Singapore’s GIC.

Blackstone and GIC swapped portfolio assets in the last quarter of 2021 in the largest direct sale in Australian commercial property history.

GIC’s 49 per cent share of Dexus Australia Logistics Trust (DALT) went to Blackstone for more than $2 billion with GIC then buying Blackstone’s Milestone Logistics Portfolio for $3.8 billion.

The office and retail property market had the highest volume of single asset transactions.

Transactions by property type: Australia

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Domestic investors drove volume numbers higher in the retail property market in the last quarter of 2021 with several shopping centres changing hands for a total of $5.8 billion.

“The near 140 per cent increase in retail transactions is almost purely driven by domestic investors who appear to be warming to the sector once again,” Real Capital Analytics head of real estate research Benjamin Martin-Henry said.

Sydney topped the list for both office property and industrial property sales with overseas investors stepping in to account for 60 per cent of the total office property volume, the largest share in more than a decade.

Blackstone made an appearance here too, buying a 50 per cent share in Grosvenor Place for $925 million, while Lendlease sold the Melbourne Quarter Tower to South Korea’s NPS for $1.2 billion.

EY Centre was sold to Mirvac who teamed up with British firm M&G Real Estate to buy it for $579 million.

“Investors have shown a lot of faith in the Sydney office market with some significant transactions over the year,” Martin-Henry said.

Top single asset property sales: Australia

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The record commercial property deal volume comes after worry about the market due to the impacts of Covid-19.

But Australia has kept pace with the US, doubling its 2020 volume, much as the US has done.

While Hong Kong and China recorded double-digit growth, Singapore raced ahead with a 170 per cent increase on its 2020 volume.

Australia, however, managed to hold a spot in the top three for each of the different office, retail and industrial property markets.

“The Australian market has bounced back significantly better than many of our global peers, particularly in the office and retail sector,” Real Capital Analytics head of real estate research David Green-Morgan said.

And setting record volumes may not be done with yet, according to says Martin-Henry.

“We also have another $2 billion worth of Sydney offices awaiting settlement, which is a promising sign,” Martin-Henry said.