State-owned Chinese property players are looking to follow a recent surge of south-east Asian investment in Melbourne's commercial market, but they may be confronted by a shortage of quality assets, agents say.
The heritage-listed Equity Chambers building at 472 Bourke Street was the latest development-ready property to change hands on Tuesday after being bought by a private developer based in mainland China.
The six-level office building, largely vacant of tenants, was built on the site of Melbourne's first synagogue and sold for $15 million or $12,908 per square metre.
Its sale follows a high-profile $275 million buying spree by three Singapore and Hong Kong-based investors over the past six weeks targeting five large commercial and development assets.
Savills Australia's director Clinton Baxter, who negotiated the Bourke Street sale, said Asian developers were reacting to Australia's low interest rates, the falling dollar and their ability to sell apartments offshore.
But the city market was "getting quite tight now" after a flurry of recent sales. "Right now if an offshore buyer comes to Melbourne they've got very limited purchase options," he said.
Several large state-owned Chinese property companies such as the Greenland Group were now on the hunt for assets in Melbourne, Jones Lang Lasalle's James Kaufman said.
Most were larger than comparable businesses such as Lend Lease in Australia, he said. "In terms of the Chinese, I think we've only seen the start of it."
The local interest from large Singaporean and Chinese players was being driven by the governments in those countries deliberately trying to slow demand in their property sectors, Mr Kaufman said.
As a result, the bigger players were broadening their scope of operations having seen the success of compatriots such as Chip Eng Seng Corporation, he said. Listed Singaporean entity Hiap Hoe has purchased three Melbourne sites with a combined value of $177.6 million in the past six weeks.
Charter Keck Cramer director Robert Papaleo said the motives of offshore residential developers were not necessarily "grounded in meeting the needs of local occupiers".
The volume of new residential projects being released to buyers this year was stronger than last year and at near-record levels, CKC estimates. "That's increasingly driven by offshore developers meeting the needs of offshore investors rather than responding to local demand," Mr Papaleo said.
The tight supply of development and investment options in central Melbourne was likely to generate interest outside the CBD, particularly in suburbs such as Doncaster and Box Hill, Colliers International metro markets director Peter Bremner said.
Colliers expects strong Asian interest in a 2.8-hectare site on the corner of Williamson Road and Henry Street in Doncaster that is about to hit the market.
The Chinese buyer of 472 Bourke Street intended on develop a hotel and residential apartments on the site, Mr Baxter said.
The building, sold by publicly listed Malaysian company DKLS Industries Berhad, previously had a lapsed planning permit for 16 levels of 215 residential apartments.