Asian investors are increasingly willing to take more risk to achieve a higher yield in office markets and are looking beyond Melbourne and Sydney to Brisbane, Perth, Canberra and Adelaide.
Knight Frank has today launched it's latest Global Cities report for 2016, examining the market performance of 20 cities across the world including Melbourne and Sydney.
The report covers 10 cities in the Asia Pacific region, and states that we are now seeing the landscape of a new real estate investment market emerge, one characterised by growing cross-border money flows, a push to diversify portfolios, and a willingness to look beyond the traditional sectors of office, retail and industrial.
The report shows that a growing wave of Asian outbound capital, specifically from Singapore and China, is targeting core real estate assets in Western markets. Asian investments into the US, UK, Australia and Continental Europe totalled US$78.4 million over the past two years, the report shows.
"We have seen an increase in Chinese investment into Australia in recent years, driven by a slowing domestic economy, measures to cool the housing market and the relaxation of regulations on overseas investments – all of which have prompted many Chinese investors to seek opportunities abroad," said Knight Frank’s Head of Institutional Sales for Australia, James Parry.
"Regardless of whether Chinese investment eventually cools, there is significant potential for increased capital to flow into Australia from places such as Japan, Taiwan and also the US given the lower Australian dollar. Quality institutional assets will continue to hold a place for offshore capital investment," said Parry.
Parry said that Asian investors are increasingly willing to take more risk to achieve a higher yield in office markets and are looking beyond Melbourne and Sydney to Brisbane, Perth, Canberra and Adelaide. They are also purchasing suburban assets, a new trend for offshore investors who would previously have only been interested in CBD assets.
Neil Brookes, Head of Capital Markets, Asia Pacific, Knight Frank Asia Pacific, said there is strong desire from Asian investors to diversify their holdings into markets outside of Asia, particularly Europe and Australia, and a substantial sell down of assets in China due to the worsening economic conditions.