Offshore buyers look down under
Australia can expect the lion's share of growing investor interest in the Asia-Pacific region in the next year, CBRE's Hong Kong-based head of research said.
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.