Foreign investors dominate commercial property market

Australian commercial property investment surges in Q2 2024. Foreign investors lead office acquisitions. Industrial and office sectors dominate, driving market recovery.

Investment in Australia’s commercial property market surged in the second quarter of 2024, with foreign investors leading the charge in major office acquisitions.

According to JLL Research, investment into office, retail, and industrial markets topped $7 billion in Q2 2024, marking a 60% increase from Q1 and doubling the figures from the same timeframe last year.

The office and industrial sectors were the primary drivers, accounting for 80% of the total investment. Office sales rebounded strongly, reaching $2.7 billion, while industrial investments hit $3 billion.

JLL’s Head of Capital Markets for Australia and New Zealand, Luke Billiau, said the jump in sales partly reflected ongoing appetite for industrial assets and more price discovery in the office sector.

“We’re encouraged by the activity in the first half and that it reflects the start of a rebound in capital markets activity,” Mr Billiau said.

Foreign investors made a significant comeback, spending $2.8 billion in the first half of 2024, nearly matching their total investment for the entire year of 2023. This surge resulted in offshore buyers taking the largest share of Australian commercial property market sales.

JLL Research estimates that foreign investors have accounted for 24% of total investment sales to date in 2024, up from a low of 16% in 2023. However, this figure remains below the 10-year average of 32%.

Private capital also played a major role, contributing $2.25 billion to deal volumes, followed by superannuation funds at $1.96 billion.

Mr Billiau highlighted that commercial property sales in the first half were driven by Australian listed and unlisted funds divesting assets.

“We need to start getting comfortable with uncertainty,” he said.

“The global macro environment certainly still has some challenges that are weighing on investors. Still, risks are being priced in and more groups are starting to look to Australia for stability, growth and interesting investment opportunities.”

Looking ahead, JLL estimates approximately $28 billion in total volume for 2024, a significant increase from $19.4 billion in 2023 and approaching the long-term average of around $31 billion.

While retail investment was subdued in the first half of 2024, the outlook remains positive.

Mr Billiau noted a change in institutional sentiment towards the sector and a pipeline of transactions that could contribute to increased volume in the second half of the year.

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