sydney commercial
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  • Commercial property transactional activity totaled $15.2 billion during H1 2022
  • This is down from $23.8 billion during the same time last year
  • Outbound capital volumes on the rise following a fall during the first two years of the pandemic

Following record capital flows in 2021, commercial property transactional activity has moderated across Australia, according to a new CBRE report.

The In & Out report noted that around $15.2 billion worth of office, industrial, hotel and retail assets changed hands in H1 2022, down from $23.8 billion in the corresponding period last year.

Fewer major industrial and logistics (I&L) portfolio transaction was one of the key drivers, with volumes declining from $10.6 billion to $3.5 billion.

This follows a significant number of deals in early 2021, such as the $3.8 billion purchase of the Milestone logistics property portfolio from Blackstone to ESR Australia.

Other major transactions included the sale of a 90% stake in the Fife industrial and logistics portfolio to PGIM Real Estate and Manulife for $850 million and the Moorebank Logistics Park $1.67 billion sale.

H1 volumes by sector and offshore investment

h1 volumes by sector
Source: CBRE

As shown in the above chart, office transactions topped H1 2022 activity, accounting for around $6.3 billion, followed by $4.7 billion of retail transactions, 11% higher compared to H1 2021.

CBRE’s Head of Capital Markets, Mark Coster, noted the decline in the overall sales volume is not a reflection of investor interest or the market.

“We saw significant trading in 2021 so it’s natural to expect market activity to decline year on year,” he said.

“We continue to see strong investor interest, albeit at pricing reflective of the changing dynamics in the market around rental growth, differing risks across the asset classes and the cost of debt, which has moved upwards over the past quarter.”

Mark Coster, CBRE Head of Capital Markets

26% of transactions were offshore investments during H1 2022, which is down from 35% during the same period last year.

Tom Broderick, CBRE’s Australian Head of Capital Markets Research, noted that Hong Kong investors led investment activity, accounting for about $1.3 billion in acquisitions in 2022.

“Investors from Hong Kong appear to be diversifying their portfolios with Australia being a key destination. In fact, since 2020, Australia has been the second most popular destination globally, behind only Mainland China, for Hong Kong outbound capital investing in commercial real estate.”

Other top sources of offshore capital in Australia were Singapore ($1.2 billion), the United States ($500 million), Germany ($460 million) and South Korea ($320 million).

Open borders have resulted in accelerated capital outflow from Australia, with H1 2022 doubling H1 2021.

Australian Outbound Capital Volumes

Australian outbound capital volumes
Source: CBRE

The most significant deal signed in H1 2022 was Lendlease’s joint venture with Singtel to rebuild its headquarters in Singapore. Investment activity was spread relatively evenly across the Asia Pacific, Americas and EMEA (Europe, Middle East and Africa).

Top 5 Destinations for Australian Investors

top 5 destinations aus investors
Source: CBRE

The report noted that Vietnam and France, two countries that had not historically witnessed capital from Australian-based companies had seen more capital deployed from early 2022.

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