Strong Asian investment into commercial property is driving a string of seven-figure sales in locked down Sydney, buoyed by a bullish residential market and an unwavering confidence in the nation’s post-pandemic recovery.
Despite becoming the epicentre of the nation’s most severe COVID-19 outbreak, the Colliers’ Asia Markets team have finalised a commercial property deal in Sydney every 5.5 days since the start of the new financial year.
The department’s average sale was $7.8 million, with the buyer pool made up of a mix of offshore and onshore investors.
Transactions include the $8.2 million sale of a Rozelle retail precinct at 670-672 Darling Street and a vacant block on Liverpool Road in Ashfield fetching $4.6 million.
It’s understood a Hong Kong-based buyer is in negotiations for the seven-storey mixed-use tower at 390-396 Pitt Street, with a price tag in the $80 million range.
Colliers’ Joseph Lin said his Asian clients, many of whom had experienced the property downturn following the 2003 SARS outbreak, remained confident about the Sydney market for three reasons.
“Despite COVID lockdowns, Australia has managed the pandemic reasonably well in comparison to Europe and the US,” Mr Lin said.
And the recovery of the residential market – whereby Sydney’s median house price rose 24 per cent in the year to June – was viewed as a positive indicator for the commercial market.
Lastly, Mr Lin said his clients continued to “embrace bricks and mortar against the anticipated inflation as a rule of thumb”.
In July, a retail building opposite Burwood Westfield with mixed-use zoning to an Asian investor for $9 million. The national director of Asia markets at Colliers, Steam Leung, fielded four offers on 37a-39 Burwood Road.
“Demand is very strong from my client base because the Chinese market sees Australia as a safe haven that has a transparent political environment and ownership structure that has delivered generous returns over the past few decades,” he said.
“To simplify this further, my buyers are also attracted [to the] wide selection of asset types available for purchase and the lovely weather and blue sky.”
In the first half of this year, Asian investment in commercial property in Australia totalled $5.1 billion, according to Real Capital Analytics, an analysis firm collecting data on sales above $1 million.
Another $3.2 billion has been reported since the start of July.
The data shows the Asia Pacific region accounts for 30 per cent of all foreign investment into commercial property, which includes the office, retail, industrial and development sectors.
Major institutional investment deals, such as Chinese Investment Corporation’s acquisition of a half stake in Sydney’s Grosvenor Place for $925 million, accounted for a significant portion of the figures.
“Asian investment has picked up this year off the back of deals such as the Milestone Logistics Portfolio sold to GIC and ESR for $3.8 billion, and the closing of Grosvenor Place, which transacted in 2020 but didn’t settle until Q3 2021,” said Benjamin Martin-Henry, Real Capital Analytics’ head of analytics.
“Asian investors continue to see relative value in the Australian property market and may eclipse 2019 as the record year for capital deployment in Australia.”
So far this year, most Asian capital has flowed from Singapore, followed by China and Hong Kong, according to Real Capital Analytics.
In Sydney, some properties have sold to Asian buyers before they hit the market. This was the case in Ashfield, where a developer purchased an 850-square-metre vacant block for $4.6 million.
“The buyer was procured from a ‘coming soon’ email blast,” said Zhenni Lu, manager of Colliers Asia Markets. “Contracts exchanged within one week, irrespective of the current lock down environment.”