Cushman & Wakefield research indicates a weight of money from more than 50 offshore firms is seeking a home in Australian property.
It’s well known that overseas investors are keeping a keen eye on Australian assets at the moment, however new research from Cushman & Wakefield has for the first quantified this figure: a massive US$16.5 billion (AU$18.5 billion) in offshore money is currently seeking assets in Australian commercial property.
Cushman & Wakefield Director – Investment Sales, Mr Tony Dixon, said money from Singapore based investment firms is leading the charge to our shores, with other Asia Pacific countries as well as European and US firms following suit.
“Our regular discussions with our international partners clearly indicate that the appetite for Australian assets runs deep and wide across the globe. We are receiving new enquiries from high profile investors on a weekly basis and in many instances these firms are demonstrating a willingness to pay a premium, especially those who are taking a trophy hunter approach with their acquisition strategy,” Mr Dixon said.
“Existing asset owners are approaching a critical stage, as the intense weigh of international money coupled with the growing investment capacity of domestic superannuation firms creates a scenario in which it may be attractive not to take their assets to market,” he said.
Cushman & Wakefield research shows Singaporean firms have the largest allocation for Australian investment, totalling an estimated US$4.1 billion USD, with firms out of the US, Malaysia and China next in line in terms of weight of money.
“Unsurprisingly, there is a uniform preference among offshore investors for prime grade properties in core CBD markets with long term leases in place. However, due to the limited availability of stock, there is also a growing recognition that secondary assets are worthy of consideration,” Mr Dixon said.
The Cushman & Wakefield research report titled Capital Flows: How heavy is the weight of money? examines the amount of money destined for Australian assets, as well as the source of the massive amount of funds and the mandates of the major players.
Presently, explains Cushman & Wakefield Associate Director – Research & Consultancy Peter Ainge, the major international investors have merely “dipped their toes in the water” when it comes to Australian acquisitions. But a more direct and aggressive move is on the short term cards.
“There a few key indicators suggesting a wealth of money is headed our way. Over the past three years 5 out of the 10 largest property purchasers in the world have bought property within Australia,” Mr Ainge said.
“In total there has been some $610 billion worth of property purchased globally by investors outside of their country of origin in the three years to July 2013. However of this $610 billion, Australian investment accounted for less than 3%.
“While Australian assets are on the radar of the world’s major investors, they have only been active in the sense they have been sticking their toes in the water to this point.
“Our research has identified over 50 offshore firms that have a definite mandate for Australian investment. Then there are the many other firms who may not have a direct mandate, but would be willing to invest in Australia if the right opportunity presents itself.
“This is particularly true for China based firms who have a tendency to keep their plans closely guarded. In any event, it is clear our domestic REITs and superannuation funds will experience heightened competition for prime grade assets.
This brings secondary assets into play, Mr Ainge said.
“Some offshore investors with firm ambitions to invest in Australia may find they need to broaden their investment mandates beyond the prime assets and core markets. While this is yet to materialise into actual purchases at this stage, Cushman & Wakefield can confirm that enquiry levels for secondary assets have increased,” Mr Ainge said.
“Hence any cap rate compression in the secondary asset market is likely to be driven by an increased weight of money rather than underlying property fundamentals,” he said.