Foreign buyers pour $5.2b into office and retail

INTERNATIONAL investors are dominating the national office and retail property sector, with more than $5.2 billion of sales completed in the past year.

By InvestSMART · 21 Mar 2012

By InvestSMART ·
21 Mar 2012

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INTERNATIONAL investors are dominating the national office and retail property sector, with more than $5.2 billion of sales completed in the past year.

The deals are in defiance of the strong Australian dollar and reflect the country's stable workforce, rental conditions and high-grade assets being offered, according to the selling agents.

Australian real estate investment trusts are the main vendors as they look to raise capital for the spate of share buybacks and in the general course of "recycling" assets to freshen up the portfolio.

One of the latest assets being reviewed is the half-share of Mirvac's 60 Margaret Street, understood to have been put on the market by the MTAA Super fund.

Asia's LaSalle Investment Management is said to be among the investors looking at the stake in the $450 million property, which has 36 levels of office accommodation and three levels of retailing, known as the Met Centre.

Last year, about $5.23 billion flowed into Australia, a 21 per cent increase over 2010.

Asian investors are becoming increasingly active in Sydney's retail investment market, spending $231.9 million last year compared with $26.3 million in 2010, according to CBRE and Jones Lang LaSalle Research.

CBRE's latest MarketView report says the office investment market is expected to remain strong through this year, driven by foreign investors, unlisted funds and superannuation groups, with privates active at the lower end.

The senior manager for global research and consulting at CBRE, Luke Nixon, said it was expected Australian real estate investment trusts would continue to be net vendors of CBD office property until there was a significant rise in sharemarket valuations.

The five biggest office sales at or above the $200 million mark during the year included 259 George Street, Sydney, for $395 million to the Tay family of Singapore, Riverside Plaza, 452 Flinders Street, Melbourne, for $201 million to the DEXUS Property Wholesale Fund and half of the QV1 building, 250 George Street, Perth, for $310 million to Australian Reward Alliance.

Asian investors were prominent price-setters in the Sydney retail market, accounting for one in five transactions of more than $5 million last year.

According to Anthony Bray, the director of sales and investments at Jones Lang LaSalle, Australia is seen as a haven for foreign investors due to the transparency of the market, strong economic fundamentals and exclusive enclaves of prime retail shops, mainly in major CBD precincts.

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Frequently Asked Questions about this Article…

How much foreign investment flowed into Australia’s office and retail property market last year?

According to the article, international investors completed more than $5.2 billion of office and retail property sales in the past year, with about $5.23 billion flowing into Australia overall — a 21% increase over 2010.

Which types of foreign buyers are dominating office and retail property purchases in Australia?

The article says Asian investors are particularly active, alongside unlisted funds, superannuation groups and private buyers. Examples named include LaSalle Investment Management and the Tay family of Singapore as buyers or interested parties.

Why are foreign investors attracted to Australian office and retail property despite a strong Australian dollar?

Selling agents and market commentators in the article point to Australia’s stable workforce, solid rental conditions, high‑grade assets and market transparency. Anthony Bray from Jones Lang LaSalle also notes strong economic fundamentals and exclusive prime retail enclaves in major CBD precincts as draws for foreign buyers.

What role are Australian real estate investment trusts (REITs) playing in recent property transactions?

The article reports that Australian REITs have been major vendors, selling assets to raise capital for share buybacks and to 'recycle' portfolios. CBRE’s Luke Nixon expects REITs to remain net sellers of CBD office property until there’s a significant rise in sharemarket valuations.

What is the significance of the Mirvac 60 Margaret Street (Met Centre) stake mentioned in the article?

The story notes a half‑share of Mirvac’s 60 Margaret Street — the Met Centre, a $450 million asset with 36 levels of office and three levels of retail — was put on the market by the MTAA Super fund, with Asia’s LaSalle reported among interested investors. It’s cited as an example of a high‑grade asset attracting foreign capital.

What does CBRE’s MarketView say about the outlook for office investment in Australia?

CBRE’s MarketView, as cited in the article, expects the office investment market to remain strong through the year, driven by foreign investors, unlisted funds and superannuation groups, with private buyers active at the lower end of the market.

Which major office transactions of $200 million or more are highlighted, and who bought them?

The article lists several large deals: 259 George Street, Sydney — $395 million to the Tay family of Singapore; Riverside Plaza (452 Flinders Street, Melbourne) — $201 million to the DEXUS Property Wholesale Fund; and half of QV1 (250 George Street, Perth) — $310 million to Australian Reward Alliance.

How active were Asian investors in Sydney’s retail market and why does that matter for everyday investors?

Per the article, Asian investors spent $231.9 million in Sydney’s retail investment market last year versus $26.3 million in 2010, and they accounted for about one in five transactions above $5 million. For everyday investors, that rising participation can influence pricing, competition for prime retail assets and overall market dynamics.