Foreign Investors Dominate Australia's Commercial Property Market

Investment in Australia’s commercial property market surged in the second quarter of 2024, with foreign investors playing a pivotal role in major office acquisitions. According to recent data from JLL Research, investment into the office, retail, and industrial markets exceeded $7 billion in Q2 2024, marking a significant 60% increase from Q1 and doubling the figures from the same period last year.

Office and Industrial Sectors Drive Growth

The office and industrial sectors were the primary drivers of this growth, accounting for 80% of the total investment. Office sales rebounded impressively, reaching $2.7 billion, while industrial investments soared to $3 billion. Luke Billiau, JLL’s Head of Capital Markets for Australia and New Zealand, noted that this surge reflects ongoing demand for industrial assets and better price discovery within 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,” said Mr. Billiau.

Foreign Investors Lead the Charge

Foreign investors made a robust comeback, spending $2.8 billion in the first half of 2024, nearly matching their total investment for the entirety of 2023. This surge positioned offshore buyers as the largest contributors to Australian commercial property market sales. JLL Research revealed that foreign investors accounted for 24% of total investment sales in 2024, a significant rise from a low of 16% in 2023. However, this figure remains below the 10-year average of 32%, indicating there is still room for foreign capital to grow.

Domestic Contributions Remain Strong

Private capital played a major role, contributing $2.25 billion to deal volumes, followed closely by superannuation funds at $1.96 billion. Mr. Billiau highlighted that Australian listed and unlisted funds were actively divesting assets, driving a large portion of the commercial property sales in the first half of the year.

“We need to start getting comfortable with uncertainty,” Mr. Billiau said. He emphasized that while the global macro environment continues to present challenges, investors are starting to price in these risks. Consequently, more groups are considering Australia as a stable and attractive destination for investment, offering potential growth and unique opportunities.

Positive Outlook for the Rest of 2024

Looking ahead, JLL estimates approximately $28 billion in total investment volume for 2024, a notable increase from $19.4 billion in 2023. This forecast is approaching the long-term average of around $31 billion, signaling a strong year for Australia’s commercial property market.

While the retail sector experienced subdued activity in the first half of 2024, the outlook remains optimistic. Mr. Billiau pointed out a shift in institutional sentiment towards retail properties and noted a promising pipeline of transactions that could boost investment volumes in the second half of the year.

Conclusion

The rebound in Australia’s commercial property market, particularly in the office and industrial sectors, highlights renewed investor confidence, with foreign capital making a significant impact. As more investors adjust to the global economic landscape, Australia’s market stability and growth prospects continue to attract both domestic and international interest.

With foreign and private capital contributing significantly, the market is on track to exceed last year’s performance, positioning 2024 as a year of recovery and growth.