According to CBRE, Australia's commercial real estate remains a popular investment destination for international investors, with foreign investors accounting for 33% of all transaction activity in the first half of 2017. Sale in Qatar | Property Hunter
According to new CBRE research, Asia continues to be a major source of money, with approximately $1.6 billion in Asian outbound capital invested directly in Australian property in the first half of 2017.
Although this was a 25% decrease from the same time in 2016, CBRE's Head of Research for Australia Stephen McNabb pointed out that this should be seen in the sense of a market where total transaction volumes dropped by 37% in Australian dollars.
"Foreign investment accounted for about a third of all operation in Australia's commercial property sector," Mr. McNabb said, "with demand for assets remaining strong given the higher yields and strong fundamentals shown by the Sydney and Melbourne markets."
He attributed the drop in investment activity to a lack of available stock rather than a drop in buyer interest, noting that Australia was ranked first in CBRE's 2017 Investor Intentions survey as the top destination for cross-border capital.
"There is no compelling reason to sell assets at this point of the yield cycle, which is approaching its height in Australia's major markets, and with a fair immediate outlook for rent growth. From an investment standpoint, assets are still in high demand, as evidenced by more yield compression across all asset classes in the first half of 2017 "Mr. McNabb expressed his thoughts.
According to CBRE Research, approximately $45.2 billion of Asian outbound capital was directly invested in global property in the first half of 2017, up 98.4% from the $22.8 billion allocated in the first half of 2016.
The preference of investors for big-ticket deals in the global real estate sector drove Asian outbound investment growth. In the first half of 2017, 74 percent of committed assets were invested in transformations worth $250 million or more, compared to 56 percent in the same timeframe last year.
Asian investors are also optimistic on Europe, the Middle East, and Africa (EMEA) and the Americas, which attracted $21.9 billion and $11.3 billion in cash, respectively, mainly due to a single $13.2 billion from the logistics portfolio acquisition. Intra-Asian investments continued to expand in the first half, reaching $10.4 billion, a 23 percent increase in total money.
Asset strategies continue to emphasize sectoral diversity, with Asian outbound buyers rebalancing foreign real estate portfolios. The most appealing sectors are office and logistics, which accounted for 44 percent and 34 percent of all invested resources in the first half, respectively. Residential (7%), hotel (7%), retail (6%), and niche sectors such as aged-care housing (2%) remained niche investments globally.
Despite increased regulation, China's outbound investment remains the region's biggest, with a new community of investors becoming more involved in the first half. In the first half of 2017, Chinese sovereign wealth funds (SWFs) became the largest single outbound investor class, with total capital deployment reaching $25.6 billion, up from $10.1 billion the previous year. In the first half of 2017, Chinese property companies and conglomerates were also significant buyers of offshore real estate properties.
On August 18, the State Council and the National Development and Reform Commission (NDRC) issued a new round of capital controls, focusing on offshore real estate investments. According to CBRE, this regulatory change does not impact outbound investment appetite in the medium to long term, but it may reshape investment strategies in the future.
"Our data shows that in H1 2017, China remained the largest source of cross-border commercial real estate investment capital (both new and capital already circulating offshore) from Asia," said Robert Fong, director of Asia Pacific research.
"New regulations should help to ensure that potential outbound investment is more financially sound and strategically oriented, but Chinese capital's effect on key global real estate markets will likely continue for some time."
The following are some other main findings:
Outbound investors from Singapore ($6.8 billion), Hong Kong ($6.6 billion), and South Korea ($2.9 billion) remain involved and continue to allocate capital as Chinese investors rebalance their portfolios.
The number of portfolio transactions is increasing: Asian outbound investors are increasingly using portfolio transactions to allocate funds. There were 26 portfolio transactions committed in the first half of 2017, compared to 13 in the first half of 2016.
When it comes to investing in real estate, Asian outbound investors are expanding their horizons beyond gateway cities. The top five urban destinations accounted for 31% of total Asian outbound capital in the first half of 2017, compared to 54% in the first half of 2016.
China's outbound diversity: Chinese capital is still being deployed in a variety of ways around the country. Office (Americas), logistics (EMEA), residential (Japan), and hotels (Australia) were the top outbound investment destinations in the first half of 2017, demonstrating the global appeal of diverse and high-quality real estate properties.