Record high for foreign commercial property investment in Australia

The level of foreign investment in Australia’s commercial property market has already risen above last year’s record high, according to Jones Lang LaSalle.

Last year, foreign investment of all office, retail and industrial property in Australia accounted for 25% of transactions placed, as reported by the South China Morning Post.

The record amount - which equated to $5 bn worth of investment - has already been superseded in Q3 2012, with offshore investment already up 10% on the previous year.

Simon Storry, Jones Lang LaSalle's Head of Office Investments Australia said: “We anticipate the level of foreign investment will continue into next year, given the wide yield spreads between Australia and other markets and the strong domestic fundamentals – low supply and low vacancy in most commercial real estate markets.”

As of Q3 2012, Australia’s market now corresponds to global trends, with strong demand for investment opportunities and a subdued leasing market, with limited space set to come onto the market over the next two years helping to fuel demand.

Storry continued: Real estate markets derive their strength from two fundamental sources – supply and yields. The limited supply pipeline is currently supporting values.

“There is very little office construction over the next two years and a similar story in industrial. For retail, the focus of many centre owners is on upgrading and refurbishing existing centres.”

Demand is by far outstretching supply; fuelling record amounts of commercial property investment despite diminished amounts of Grade A office space and planned new builds coming on the market.

The lack of planned new builds is fuelling interest from commercial property investors which has also affected markets in many countries across the globe.

SOS reported recently that trends have been manifesting themselves similarly in the real estate markets of Hong Kong, UK and Asia Pacific Markets.