Global capital targets big assets

Australia’s major cities have recently seen a string of big-ticket investments by foreign players

May 31, 2019

Australia’s major cities have recently seen a string of big-ticket investments by foreign players in a sign of strengthening global demand for the country’s quality assets.

Playing into its hands is the country’s reputation as a safe haven for global investment, particularly in comparison to uncertainty in Europe and the U.S.

Since 2018, foreign investors have accounted for 48 percent of transactions - A$5.85 billion - for Australian office assets valued at over A$250 million.

Australia is benefitting from growing global caution as investors look for destinations that provide transparency and growth, says Rob Sewell, head of Office Investments, Australia, JLL.

“Australia has always been that destination, but issues elsewhere, such as the US-China trade war and Brexit, are reinforcing that reputation.”

The country is in a small league of ‘hyper transparent’ locations, in pole position for the US$1 trillion-a-year avalanche of funds targeting real estate by mid-2020, according to JLL’s Global Real Estate Transparency Index.

Another source of offshore capital entering Australia is the increasing number of real estate funds forming alliances with strategic capital investors that are favouring real estate over other investment alternatives, Sewell adds.

And the penchant for trophy assets is explained by their “ability to hold value through property cycles”.
In a major vote of confidence in the Australian market by an overseas player, Canadian fund Oxford Properties acquired the Investa Office Fund in December 2018, fending off competition from a US counterpart.

Melbourne's office towers are attracting significant overseas investment, a key example being the purchase of 595 Collins Street by a private Hong Kong buyer in early 2019. It was sold by South Korea’s National Pension Service, represented by U.S. firm PGIM Real Estate, for A$314 million.

In Sydney more recently, the Hong Kong Monetary Authority upped its 25 percent stake in International Tower 1 at Barangaroo, by another 10 per cent, in a deal with Lendlease. The 48-storey building, completed in 2015, is valued at A$2.6 billion

“With Australia remaining the focus of major global investors who have the ability and desire to undertake large transactions, the big deals will continue to land – the depth of capital is there,” says Sewell.