Offshore investment in commercial property at new highs

Offshore investment in commercial property at new highsOffshore investors have snapped up more than half of the $8.6 billion in commercial property traded during Q3 2015, according to new CBRE data.CBRE’s sales analysis takes into account sales of retail, industrial and office property valued at over $5 million.It shows that offshore buyers accounted for 56 per cent of total sales, by value, during the quarter – the highest proportion recorded in the 10 years of record keeping by CBRE.CBRE’s head of research in Australia, Stephen McNabb says the high level of overseas purchasing activity had pushed total sales in the quarter 8.5 per cent higher than the corresponding quarter last year. “Given the current level of transaction activity we are on pace to reach the record $29.6 billion in annual sales recorded during 2014,” McNabb says.The major source of new capital has been China, with Australia attracting close to 25 per cent of the US$6.5 billion in Chinese investment capital released into global real estate markets in the first half of this year.Mark Granter, CBRE’s executive managing director for capital markets, says the surge of Chinese capital was initially driven by private investors and developers, but is now being propelled by major institutional investors.He says larger Chinese life insurers are beginning to target opportunities as they “look at geographic diversification to balance their investment portfolios.” Sydney and Melbourne are high on the radar, alongside New York, London and Singapore.Major Australian acquisitions in Q3 include the $2.5 billion purchase of the Investa portfolio by China Investment Corporation.Singapore’s Ascendas Real Estate Investment Trust was another significant investor during the period, having purchased a portfolio of 26 logistics properties from GIC in a deal valued at $1.01 billion.CBRE says the net investment position of offshore investors has grown to $24 billion since 2006. However, a number of larger offshore transactions, such as that of the GIC portfolio, involved sales by existing offshore owners.Some offshore investors with high existing weightings to Australia may look to recycle capital into other global markets, Granter says, while new capital being unlocked from Asia “should continue to support the net offshore picture in the coming year, at least.”