The prospect of interest rate cuts early in 2025 and strong manoeuvres planned by employers to herd capital city work-from-homers (WFH) back in the office is pennies from heaven for Australia’s commercial real estate sector.
In a major reverse of sector’s recent slow motion crisis, commercial property is displaying signs of its long-awaited resurgence. According to CBRE’s Australian Capital Flows Report 2024, $8.4 billion worth of towers changed hands in 2024, which is 56% up on last year.
Throw in major deals in the retail centre ($7.3 billion) and warehouse space ($7.1 billion) - aka industrials and logistics - and the total number of deals this year is $29.2 billion, 21% up on 2023.
Adding to the resurgence of foreign dealmakers in this space - up 37% on last year - are falls in the value of the Australian dollar, significant discounts especially in the office sector and the country’s population growth.
However, CBRE is witnessing more stabilised price after a period of softer yields.
Overall, the U.S. ($3.6 billion), Japan ($1.9 billion) and Singaporean ($1 billion) emerged as key sources of overseas investment — with U.S. investment concentrated in the office space.
Together, these three countries represented over a fifth (23%) of total offshore investment in the commercial real estate sector year.
While investment within the living sector was flatlined over 12 months at $4.8 billion, the hotels sector was the odd one out recording only $1.6 billion in transactions, well down on $2.5 billion in 2023.
Notable deals struck this year include the U.S group Greystar’s acquisition of a $1.6 billion student housing portfolio and the U.S group Hines backing of fund manager Habern’s Westpoint Shopping Centre in Sydney for $900 million.
Looking forward, CBRE expects Australia to remain one of the priority markets for offshore investors in Asia Pacific in 2025.