Colliers International is pleased to present the 2017 Capital Markets Australia & New Zealand Investment Review which explores the fundamentals' of current and future investment in the office, retail, industrial and hotel markets. Each report comprehensively dissects transactional activity, impactful industry trends and key buyer groups that were active in the financial year ending 2017 (FYE2017), and provides expert forecasts and investment outlooks for the year ahead.
Australian property investment across the office, retail, industrial and hotel sectors remained buoyant in the 2016/17 financial year. Investment across the four sectors reached $28.99 billion, with 28 per cent or $8.1 billion of those sales attributed to foreign buyers. Yield compression in each asset class will continue throughout the financial year ending 2018, with limited stock creating competitive tension between investors and therefore driving record prices.
We trust you find the Capital Markets Investment Review an insightful read.
Throughout the past year, Australian office markets have continued to build on their growing global reputation as a relatively high-yielding asset with solid long-term fundamentals, attracting more offshore capital. The total transactional value for the FYE2017 was $13.2billion, with about 75 per cent of sales taking place in New South Wales and Victoria and offshore investors making 44.9 per cent of purchases.
The report highlights privates and institutions among the most active buyer profiles, and despite a dip in transactional value across the board, the FYE2017 resulted in the biggest purchasing volume by local privates since 2008, for a total of $1.90billion.
The $6.64billion invested in Australian retail assets across the country in 2016/17 represented another strong year of activity for the sector, although 13 per cent down on the prior year’s $7.63billion. Transaction volumes increased by 8.82 per cent in the same period, from 136 to 148, suggesting a lower average transaction value.
The successful completion of several large-scale divestment programs in the prior year saw sales activity in the financial year ending 2017 rotate from sub-regional to neighbourhood centres, a theme that largely explains this year’s fall in both sales volume and average transaction price.
The overall level of foreign activity in the Retail sector moderated in the FYE2017, with 29 per cent or $1.93billion of acquisitions carried out by offshore buyers.
The total transactional value of industrial investment assets was $6.1billion in the FYE2017, another strong year for the sector, with much of the movement taking place in Victoria, New South Wales and Queensland.
Offshore buyers have increased their footprint into the Australian industrial and logistics market, enticed by the healthy returns and relative confidence in Australian assets. Offshore buyers represented about 35 per cent of Australia’s industrial investment sales volume, up from 24 per cent in 2014/15 and 29 per cent in 2015/16, with the bulk of offshore capital coming from the United States and Singapore.
In an ensuing trend from FYE2016, infrastructure investment and economic prosperity are playing major parts in the industrial and logistics sectors.
The total hotel transaction volume in the FYE2017 for sales more than $5million came to $3.05billion, with most activity taking place in NSW (42 per cent), closely followed by Victoria (39 per cent).
The Australian hotel market continues to attract strong levels of foreign capital, led by buyers from Asia, but both domestic and international investors regard Australia as relatively low risk and a highly transparent market. Capital was primarily sourced from China, with Chinese investors purchasing 13 hotels for a total of $1.12billion. The $439million in domestic capital accounted for 14 per cent of total investment.
Australia is benefiting from increased Asian inbound arrivals, as well as strong domestic demand, and we have started to see domestic and offshore capital enquiring on well-located regional or unique assets across New South Wales, Victoria and Queensland. As a result, we are seeing an increase in transactions occurring in areas outside of the capital cities and major resort markets.