Foreign cash flood into commercial hits record $20b

by Ingrid Fuery-Wagner ( – 24 October, 2019)

The inflow of foreign capital into commercial property hit a record $20 billion in the year to September, and is likely to continue on a similar trajectory as overseas investors seek attractive yields and find relative value with a low dollar.Foreign investment activity over the year was concentrated in the office sector, which accounted for 66 per cent – or $13.2 billion – of all foreign investment across the commercial property sector, according to new data from Cushman & Wakefield.Hong Kong Monetary Authority acquired a 25 per cent stake in the $1.8 billion Wynyard Place development. 

Singapore led the way with $4.2 billion in property acquisitions over the past 12 months, with the country’s sovereign wealth fund GIC involved in one of the year’s biggest deals with its purchase of a 25.1 per cent stake in the Lendlease International Towers Trust for about $1.08 billion.

In August, Hong Kong’s central banking institution, the Hong Kong Monetary Authority acquired a 25 per cent stake in the $1.8 billion Wynyard Place development in Sydney’s CBD through AMP Capital for $450 million while Canada’s Public Sector Pension Investment Board took a stake in the $830m 43-level tower at 242 Exhibition Street in Melbourne.

There was a substantial jump in inbound investment from Canada of $3.9 billion over the last 12 months, but with $4.8 billion worth of property divested over the same period, the country’s net investment fell into the negative.

While $2 billion of investment was recorded from mainland China over the last year, Cushman & Wakefield’s international director Josh Cullen said there had been very little activity from Chinese investors and the figure was most likely a hangover from older site sales earmarked for residential projects.

“Australian office returns are generally perceived as attractive in the global context due to forecast rental growth, strong sector liquidity and market transparency. We expect demand to continue due to attractive yields and further compression and the outlook for a lower Australian dollar,” Mr Cullen said.

Deborah Coakley, who manages Dexus’ $16.2 billion funds management business, said foreign investment in both the office and industrial sectors was growing and much of that offshore capital was “seeking to partner with local experts”.

Last year Dexus partnered with GIC to create a $2 billion unlisted logistics property trust, which was seeded with assets from Dexus’s existing industrial portfolio.

“Interest remains strong from offshore capital sources, and due to the limited availability of opportunities they will pursue both direct and indirect investment,” Ms Coakley said.

The record level of foreign investment helped to increase market-wide investment volumes in commercial real estate to a new rolling annual peak of $45.6 billion.

25 Oct 2019