Commercial investment activity experienced a noticeable slowdown, primarily affecting top-tier transactions, according to recent data from CBRE.
The latest In and Out report by CBRE for the first half of 2023 revealed a 50 per cent decline in total investment volumes, amounting to $8.8 billion, compared to the corresponding period in 2022. This figure encompasses approximately $2.3 billion worth of pending deals, some of which are subject to a capital raise.
Although deal volumes experienced a decline across the entire spectrum, there was a notable contrast between transactions valued below $100 million, which saw a 36 per cent decrease, and those surpassing the $100 million mark, which recorded a 58 per cent drop.
CBRE’s Head of Capital Markets Research Tom Broderick said the smaller end of the market has been more resilient, with private buyers seeing the current conditions as an opportunity to buy assets while larger institutional groups are largely on the sidelines.
Flint Davidson, CBRE Pacific Head of Capital Markets, said “asset size is currently the single biggest factor determining buyer depth on Australian sale campaign”.
“Over $200 million, you see interest begin to thin whereas scalable transactions were a priority 18 months ago,” he said.
“There is still significant liquidity waiting to see pricing revert and debt markets stabilise particularly for larger assets. In overseas markets like Korea, where the interest rate cycle has topped out, buyer depth has returned so the market will be closely watching interest rate movements.”
The analysis reveald the office sector recorded transactions worth $1.89 billion, followed by retail at $1.83 billion. Offshore buyers accounted for 24 per cent of sales volume, down from 44 per cent in 2022. Total transactions in H1 2023 reached $2.1 billion, with the largest deal being PAG’s $393 million acquisition of 44 Market Street. Japanese investors have increased their purchases due to low interest rates and outbound direct investment from Australia dropped 87 per cent to $669 million compared to 2022.
“Following increased Australian investment into Asia Pacific markets in recent years, domestic groups, particularly large institutional investors, have become cautious in the current environment about buying assets directly as pricing re-calibrates around the world,” Mr Broderick said.
Europe was the key destination for Australian capital in H1 2023, with the Netherlands the most favoured country, accounting for 36 per cent of total outward direct investment in H1 2023, followed by the UK.