Foreign investment drives Australian commercial property surge

The Australian commercial property market has demonstrated remarkable resilience in 2024

Transaction volumes soaring to $76.64 billion, representing a substantial 19.2 per cent increase from the previous year.

This impressive growth has been significantly fuelled by a surge in foreign investment, particularly in the final quarter of the year, highlighting Australia’s enduring appeal to global investors seeking stable and profitable opportunities in the Asia-Pacific region.

Record transaction volumes across the market

The record-breaking transaction volume of $76.64 billion marks a significant milestone for the Australian commercial property sector, reflecting strong confidence in the market despite global economic uncertainties. This robust performance represents nearly a fifth higher than the previous year’s figures, demonstrating the sustained appeal of Australian commercial assets.

Ray White Head of Research, Vanessa Rader, noted the market’s exceptional performance: “The Australian commercial property market has demonstrated remarkable resilience, with foreign investment surging particularly in the final quarter of 2024.” This late-year momentum has carried forward into early 2025, suggesting a continuing trend of strong investment activity.

Market segmentation trends

A closer examination of the market reveals clear segmentation across different price points, with distinct patterns emerging in the types of investors targeting specific sectors and asset classes.

In the sub-$50 million segment, domestic private investors have maintained their dominance, accounting for approximately three-quarters of all transactions. These investors have primarily focused on industrial assets across New South Wales and Victoria, continuing a trend that has been evident in recent years as industrial property remains an attractive proposition due to its strong fundamentals and relatively stable returns.

“Domestic private investors have maintained their dominance in the sub-$50 million segment, accounting for approximately three-quarters of transactions, primarily focusing on industrial assets across NSW and Victoria,” Ms Rader explained, highlighting the continued appetite from local investors for smaller-scale commercial properties.

Meanwhile, the institutional segment, comprising deals exceeding $100 million, has shown substantial momentum, particularly in the final quarter of 2024. Total institutional transactions reached an impressive $30.43 billion, with Sydney alone accounting for more than $22 billion of this activity. This concentration of high-value transactions in Australia’s largest city underscores Sydney’s position as the country’s premier commercial property market and most attractive destination for large-scale investment.

Foreign investment dominance in premium segment

Perhaps the most notable trend in the 2024 market has been the dominant role played by foreign investors in the premium segment. International capital has emerged as the primary driver in the institutional market, representing over 60 per cent of purchases while accounting for 51.2 per cent of sales in this segment.

This significant foreign presence in the high-value transaction space reflects several factors making Australian commercial property particularly attractive to international investors. These include Australia’s relatively stable political and economic environment, transparent market conditions, strong regulatory framework, and the strategic geographic position within the fast-growing Asia-Pacific region.

The strong Australian dollar performance against certain major currencies has also created opportunities for foreign investors to leverage currency advantages when acquiring premium Australian assets. This currency dynamic has particularly benefited investors from regions experiencing relative currency weakness against the Australian dollar, allowing them to secure high-quality assets at effective discounts.

Geographic sources of foreign investment

The surge in foreign investment has come from several key geographic regions, with United States investors leading the charge in 2024. American capital has dominated acquisition activity, leveraging favourable currency positions to diversify portfolios with Australian commercial assets. This trend reflects the continuing appeal of Australia as a relatively safe haven for capital in an increasingly uncertain global investment landscape.

Japanese investors have also significantly strengthened their presence in the Australian market, following a period of relatively modest activity. This renewed interest from Japanese capital, traditionally known for its careful and strategic approach to international investment, signals strong confidence in the medium to long-term prospects of the Australian commercial property sector.

The market has also continued to see steady investment flows from Singapore, Hong Kong, and Canada, maintaining the diverse international capital base that has been a hallmark of Australia’s institutional property market in recent years. These investors, often representing sovereign wealth funds, pension funds, and large private investment companies, have demonstrated long-term commitment to the Australian market.

Ms Rader noted an emerging trend in early 2025: “We’re seeing an expanding pool of international capital, with Korean institutional investors emerging as significant new players.” This diversification of capital sources further strengthens the market’s resilience and suggests broadening international confidence in Australian commercial property.

Investment focus areas

Foreign capital has shown particular interest in specific sectors within the Australian market. Build-to-rent developments have emerged as a favoured target for international investors, alongside student accommodation projects in major metropolitan markets. These sectors offer attractive long-term returns with relatively stable income profiles, appealing to the investment parameters of many international institutional investors.

“These investors are particularly attracted to build-to-rent and student accommodation developments in major metropolitan markets, which comes at a crucial time for Australia’s housing supply challenges,” Ms Rader explained. This focus on residential-adjacent commercial property aligns with Australia’s ongoing housing affordability and supply challenges, potentially providing much-needed capital for increasing housing stock in key urban centres.

While foreign investors have concentrated on these emerging sectors, industrial assets continue to attract strong interest from both domestic and international buyers. The ongoing e-commerce revolution and supply chain reorganisation have maintained the strong fundamentals of the industrial sector, making it an attractive proposition across investor types.

Market outlook for 2025

Early indicators from 2025 suggest the strong performance of the Australian commercial property market is set to continue. The expanding pool of international capital, including new entrants such as Korean institutional investors, points to sustained offshore interest throughout the year.

Australia’s enduring market fundamentals continue to attract global investment, with its transparent market conditions and robust regulatory framework providing the stability and predictability that institutional investors value. The country’s strategic position in the Asia-Pacific region further enhances its appeal as a gateway to broader regional investment strategies.

“The combination of Australia’s transparent market conditions, robust regulatory framework, and strategic position in the Asia-Pacific region suggests sustained offshore interest through 2025,” Ms Rader said, providing an optimistic outlook for the market’s continued performance.

The emerging focus on build-to-rent and student accommodation also suggests a potential evolution in the market, with foreign capital potentially playing a crucial role in developing these relatively nascent sectors in the Australian context. This trend could have positive implications for addressing housing supply challenges while opening new investment channels.

The record-breaking transaction volume of $76.64 billion in 2024 represents a significant milestone for the Australian commercial property market, with foreign investment playing a pivotal role in driving this growth. The clear segmentation between domestic investors dominating the sub-$50 million space and international capital leading the institutional segment demonstrates the market’s maturity and diverse appeal.

As Australia moves further into 2025, the continued inflow of foreign investment appears likely to sustain market momentum, potentially leading to further evolution in key sectors such as build-to-rent and student accommodation. The expanding geographic diversity of investment sources, including emerging Korean institutional capital, further strengthens the market’s foundations.

For market participants, the strong presence of foreign investment presents both opportunities and competitive challenges. While international capital may create pricing pressure in certain premium segments, it also brings potential for new partnerships, development funding, and market innovation. As foreign investment continues to shape the Australian commercial property landscape, adaptability and strategic positioning will be key for all stakeholders seeking to thrive in this dynamic environment.

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