Australia still safe-haven for global CRE investors

Oksana Patron

3 February 2023

The relative stability of the country and its economy will continue to attract global commercial real estate (CRE) investors in 2023, with airports becoming important assets  across life sciences sector, according to Knight Frank’s Outlook Report 2023.

Global investors will be attracted to Australia this year  thanks to the country’s domestic economy expected to retain its growth momentum in 2023 and its position as a major commodity exporter providing a substantial offset to the mounting pressures on growth arising from moderation in household spending.

On top of that, inflation peak and greater certainty on rates outlook will help restore liquidity by mid-2023.

Despite its consistent reputation as the sixth most actively traded investment market in the world, Australia will not remain entirely immune to global and economic market pressures, even though the Asia Pacific investors still saw Australian cities as their top targets while executing their regional investment strategies in 2022.

“[But] this will help to mitigate against downside risks in the near term and underpin a resurgence in demand once conditions settle, especially when set against the backdrop of Australian dollar depreciation which will bolster demand from US and Singaporean investors,” Knight Frank’s chief economist, Ben Burston, said in the Outlook Report 2023 “Navigating the path to performance”.

According to ANREV’s survey, in 2022 Sydney’s industrial market remained, on par with Tokyo, was the second most favoured city market in the region, after Tokyo’s built-to-rent (BTR) market and followed by Seoul’s industrial segment which took the third spot.

Apart from traditional commercial real estate sectors (office, industrial and residential), global investors might also set sight on Australian life sciences sector which continues to mature, driven by a combination of ageing population, personalised treatments, technological advancements and other agri-tech and marine technologies.

According to the report, real estate will have a key role to play to help navigate the transition to commercialise Australia’s research capability and developer hesitancy will be overcome by availability of accurate data and understanding of how the gap between tenant and investor expectations could be bridged.

The analysis pointed to the potential of Aussie airports which can emerge as alternative locations for life sciences and innovation hubs.

“Across Australia, outer suburban precincts have emerged with various levels of success, and increasingly regional towns such as Townsville (QLD) and Pinjarra (WA) are also entering the mix with tropical diseases and food innovation specialisations,” the report said.

“Of the potential locations for new precincts, we predict airports to emerge as an alternative base fir life sciences for life sciences and innovation hubs.

“Airports offer a raft of opportunities, including transit connectivity, cheap land, increasing mix-use assets, product logistics and alignment of land use that may have otherwise been redundant.

“This is starting to emerge at locations such as Melbourne Airport (CSL), Western Sydney Aerotropolis, and the Sunshine Coast Airport with the recent approval of its Turbine Precinct development.”