Sydney, Melbourne lead pack for Asia-Pacific demand

Sydney and Melbourne will be among the top three Asia-Pacific targets for foreign investors looking to park their money in commercial real estate this year, according to new research.

Australia’s two largest cities sit behind only Tokyo as the preferred Asia-Pacific destinations for overseas commercial property buyers, with 29% of investors surveyed in Colliers International’s Global Investor Outlook listing Sydney as one of their primary targets for 2016.

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Melbourne sits just behind its local rival with 23% of investors seeking to buy there over the next 12 months, compared to a region-leading 33% in the Japanese capital.

It does not come as a surprise that Tokyo and Sydney are overseas investors’ preferred cities in the Asia-Pacific

Australia, with 53%, ranks behind only Japan’s 59% on the list of countries where foreign buyers say they will seek to purchase property before the year is out, well ahead of Hong Kong (33%), China (31%) and Singapore (30%).

Colliers International’s survey calls on more than 600 investors globally to indicate their investment plans for the coming year.

Melbourne is expected to attract a considerable amount of overseas interest this year.

The report says that while investor enthusiasm in the Asia-Pacific is on the wane due to China’s economic slowdown, Sydney and Melbourne are considered safer options are are subsequently becoming even more highly sought after.

“Given these country preferences, it does not come as a surprise that Tokyo and Sydney are overseas investors’ preferred cities in the Asia-Pacific in the next 12 months,” it says.

“This is consistent with global capital flows data year-to-date, where Tokyo and Sydney are two of the three Asia Pacific cites in the top ten of the most popular markets for cross-border investors.”

Many investors are taking a more cautious approach as China’s economic slowdown has translated into dampened activity in the China property sector

Colliers’ Outlook suggests that investors will take on less risk globally due to the volatility in some markets.

“In terms of portfolio strategy, most Asian investors (56%) indicated a requirement to expand their real estate portfolio over the next 12 months, although this is lower than last year’s 74%,” it says.

“Many investors are taking a more cautious approach as China’s economic slowdown has translated into dampened activity in the China property sector, despite relaxation of legislation.”

The news adds further impetus to an already buoyant Australian market, which is fresh off an almost record $28.4 billion worth of commercial property sales in 2015.

An unprecedented number of those deals originated in China, accounting for almost 40% of all transactions in Australia – up more than 70% on China’s 22% share in 2014.

Investor Outlook by the numbers

– 62% of Asian investors list CBD offices as their preferred sector for investment.

– Industrial and logistics are among the favourite sectors for 38% of Asian buyers.

– 45% of Australian investors have an appetite for shopping centres, compared to just 21% in Asia.

– Only 15% of local buyers see hotels as a preferred sector, as opposed to Asia’s 28%.