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Commercial property investment at record levels

Investment in Australian commercial property across the retail, industrial and office sectors hit a record high in 2014-15, according to a new report by Colliers International.

Overall investment activity across the three sectors was worth $28.88 billion in the last financial year – up 19 per cent from 2013-14.

John Marasco, managing director of capital markets and investment services at Colliers International, said transactional volumes across the industry are up as both offshore and domestic investors continue to demonstrate a strong appetite for commercial property.

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“The low interest rate environment, the falling Australian dollar and our stable economy have combined to create optimum conditions for Australian commercial property,” he said.

“The strong performance of the sector in recent years and the potential for continuing growth have made more offshore investors consider the Australian market for the first time.

“At the same time, conditions for domestic investors have also been positive, so together demand for commercial property assets is at an all-time high.”

The report said these factors have led to Sydney becoming the third most popular destination for global offshore investors, behind London and Manhattan, and ahead of Shanghai and Paris.

London is still the leading destination for global offshore capital, benefitting from $28.7 billion, with Manhattan the recipient of $12.2 billion, while global capital inflows to Sydney total $5.1 billion.

Offshore capital partnering with domestic managers is an ongoing trend that is becoming more prevalent, across all sectors, according to Mr Marasco.

“Offshore capital partnering is becoming more and more common, and not just in the office sector,” he said.

“We are increasingly seeing this trend in the industrial sector, and we’re aware it may also become more prevalent in the retail sector as well.

“Perhaps the greatest challenge for the industry is the lack of stock coming to market. Demand is certainly outweighing supply at present, and limited new supply is leading to yield compression across the board.”

Commercial property investment at record levels
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