Australian commercial real estate investment totalled $11.3B during June quarter

[view original post]
  • Total rolling annual investment has now been pushed to $52.1 billion, the third strongest figure on recor
  • This has occurred despite increasing interest rates
  • National office market investments are up by 10%

Australian commercial real estate investment during the June quarter totalled $11.3 billion, according to the latest Cushman & Wakefield.

Total rolling annual investment has now been pushed to $52.1 billion, the third strongest figure on record – something that has occurred despite higher interest rates and bond yields.

National office market investments led the quarter with $4.6 billion in reported transactions, up by 10% compared to Q2 2021. Over half of those transactions occurs in Sydney, with a quarter in Melbourne CBD.

Top deals during the quarter included Link REIT and Oxford Properties entering a joint venture in the Investa Gateway Office portfolio for $596 million, Allianz Real Estate purchasing 50% of Commonwealth Bank Place in Sydney for US$445 million from the Abu Dhabi Investment Authority.

Industrial investment volumes totalled $2 billion during the quarter, also the third highest on record. Despite this, it is down significantly from the $8.3 billion recorded during the same period in 2021. The largest transaction was the sale of a four-warehouse Pipeclay Clawson portfolio to Hines for $212 million.

Quarterly Commercial Real Estate Investment Volume (AUDm)

Source: Real Capital Analytics; Cushman & Wakefield.

The retail sector recorded $1.9 billion – 38% higher than $1.4 billion in Q1 2022 but 24% lower than the same period in 2021, which totalled $2.5 billion.

The remaining transactions – recorded as other or alternative asset classes – totalled $2.9 billion. These were led by hotels, such as GIC, Partners Group and Salter Brothers $620 million acquisition of the Travelodge portfolio and Baring PE Asia purchasing Sydney’s Hilton for $530 million.

Foreign investment represented 33% of the transactions, below the 36% long-term average. Hong Kong investors led inbound investments totals with $1.5 billion, followed by $1.2 billion by Singaporean investors.

“Investment volumes across Australian commercial real estate sectors in June remained robust against the backdrop of rising inflation, interest rates and bond yields,” said Cushman & Wakefield’s Managing Director, Australia & New Zealand, Simon Fenn.

“While the macroeconomic picture continues to change, this was the second strongest Q2 we’ve seen. The standout was strong demand for office assets in the Sydney and Melbourne CBDs, with investor confidence in the long-term fundamentals remaining in place.”

John Sears, Cushman & Wakefield’s Head of Research in Australia and New Zealand, said investors are weighing the dynamics relative to fixed income and the prospect of higher funding costs.

“As a result, we expect to see total returns and the inflation hedging benefits of real estate assets come into even sharper focus, supporting outperformance for higher quality properties,” he said.