Offshore buyers look down under
Global investors were focused on three key markets in the region: China, Japan and Australia, the company's Asia Pacific research director Nick Axford, said.
The three were attractive because China's growth was a "long-term play," Japan's economy was getting back on its feet and Australia's yields were out-performing others, Mr Axford told BusinessDay before CBRE's series of annual Market Outlook briefings.
In the past five years, international funds, in particular those from Europe and North America, divested assets throughout the region after the 2008 financial crisis.
"That pattern has just started to reverse over the past six months and we have seen for the first time positive net investment into Asia Pacific by international funds," he said.
Nearly all of that money was heading to Australia, "out-weighing all the divestment that is going on around the region". "We think it's going to accelerate ... there are few places around the world that have the economic track record of Australia."
But, while the outlook was more positive globally, CBRE was yet to see a shift towards occupiers and the business community becoming more aggressive in searching for expansion opportunities rather than being negative.
Mr Axford said it would not be long before investors started looking for better returns.
"We think that international companies are going to be saying, 'How can I now start growing my business again?'
"That's going to be very difficult to do on any scale in Europe, it's going to be tough to do on any scale in North America, so Asia is the obvious place where many are going to start reinvigorating and re-investing in their business."
Financial service companies will remain on the back foot for a while, but retailers were becoming more aggressive in the Asia Pacific and insurance and consumer finance businesses were expanding.
In Australia, yields were typically above 6 per cent for the best office space compared with under 5 per cent in most of the region, he said. Australia's key challenges were expensive debt and the high exchange rate.
Nevertheless, this year "we will see a pretty steady flow of interest from international investors at a time when domestic investors seem to be starting to ramp up their activities again," Mr Axford said.
Frequently Asked Questions about this Article…
CBRE's Asia Pacific research director Nick Axford says global investors are concentrated on China, Japan and Australia because each offers different attractions: China's growth is seen as a long-term play, Japan's economy is recovering, and Australia's property yields are outperforming many regional markets.
Yes. According to CBRE, after a period of divestment following the 2008 financial crisis, that pattern began to reverse over the past six months, producing positive net investment into the Asia Pacific—much of which has been heading to Australia.
CBRE reports that yields for the best office space in Australia are typically above 6 per cent, compared with under 5 per cent in most of the rest of the region, which helps explain the stronger investor interest in Australian property.
The article highlights two key challenges for Australia: expensive debt and a high exchange rate. These factors can affect financing costs and the returns of offshore investors buying Australian assets.
CBRE notes that retailers are becoming more aggressive across the Asia Pacific, and insurance and consumer finance businesses are expanding. Financial services companies, by contrast, are expected to remain on the back foot for a while.
Not quite. CBRE said it has not yet seen a broad shift where occupiers and businesses become aggressive about expansion, although it expects international companies will soon look to reinvigorate growth—often by turning to Asia when scale is harder to achieve in Europe or North America.
In this context, 'positive net investment' means international funds are now investing into the Asia Pacific region more than they are divesting. For everyday investors, that signals growing foreign capital interest—with much of that inflow concentrated in Australia, according to CBRE.
CBRE observes that while international investor interest in Australia is steady, domestic investors also seem to be starting to ramp up their activities again, contributing to a steady flow of market interest this year.
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