Australia still top choice for foreign investors

Middle market is defined as office assets valued from $10 million to $100 million.

According to Steam Leung, national director, Asian markets at Colliers International, although Asian capital accounted for only 12.4 per cent of all middle market sector transactions, Asian investors were responsible for 20.26 per cent of the total sale volume of office assets in 2020.

Further, there has been a reduction in offshore capital transactions over 2020, in line with a reduction of overall transaction volumes.

Offshore purchasers as a percentage of overall transactions have decreased from 27 per cent in 2019 to 20 per cent in 2020.

“Consistent with the theme of Australia being seen as a stable destination to invest, most offshore investors seeking to deploy capital into Australia are acquiring longer WALE assets, with the average acquisition offering a 5.63-year WALE, contrasting with the average 4.87 years by onshore investors.

“The temporary measures implemented by the Treasurer in March this year, which subjected foreign buyers to FIRB approval has significantly reduced the competitiveness of foreign investors; however, this hasn’t stopped activity in the Australian market,” Mr Leung said.

From January 2020 to 30 November 2020, there were 68 transactions, totalling $2.12 billion in the office middle markets space, representing a 53 per cent decrease in transactions and a 54 per cent drop in sales volumes over the same period nationally in 2019, according to Matthew Meynell, head of investment services Australia.

Despite this, market confidence has increased throughout the second half of 2020 particularly in the metro markets, where 75 per cent of the total transactions took place, suggesting positive sentiment for commercial investors for Q1 2021.

“Colliers Research shows workers still need offices to collaborate and connect, but with the increase of working from home, the functionality and size is expected to change.

“We strongly believe the resilience of Australia’s office middle markets and indeed the office asset class will carry optimism and activity well in 2021,” Mr Meynell concluded.