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Role of Foreign Investment in Local Economy ‘Irrefutable’

Foreign investment has been a critical enabler of the growth of the Australian property sector into the single most important sector in our nation’s economy, according to ESR Australia, a leading developer and manager of industrial, logistics and commercial property.

The sector currently contributes over $200 billion to GDP per annum, making it approximately 13 per cent of the total economy and employing more than 1.5 million people—more than mining and manufacturing combined.

It is unlikely that the sector could have grown to this scale without the foreign capital flows that have underpinned the funding for many of the significant development projects in Australia, including Barangaroo and the Wynyard Station redevelopment in Sydney as well as Docklands in Melbourne.

According to data from JLL, the amount of foreign capital flowing to the Australian commercial property sector has tripled during the last decade, rising to over $10 billion annually and now accounting for approximately 40 per cent of all commercial real estate transactions.

foreign Investment

▲ Walkinshaw at 71 Whiteside Rd, Clayton South VIC 

Almost all foreign capital is invested through fund managers, either domestic property groups or more prominent global property fund managers with sizeable local teams.

These capital inflows have fuelled competition in the property funds management sector, stimulating innovation and productivity and helping to position Australia as a leading player globally.

Governments at all levels have benefited from the increasing property values and sales volumes, which have filled their coffers with property tax revenues.

The recent $3.8-billion Milestone transaction was illustrative of how foreign capital is fueling the Industrial sector’s emergence as the in-demand asset class, with three of the final four bidders being funded by foreign investors.

Since this landmark deal, yields industry-wide have compressed even further, with prime metropolitan industrial assets now regularly trading at cap rates below 4 per cent, further stimulating activity across various disciplines.

Recently foreign investors have shown heightened interest in participating in development activities. This has in part been driven by the highly competitive market for stabilised property, with development exposures (for example, through develop to hold strategies) being a way for these investors to generate returns sufficient to meet their hurdles.

One of the industrial-focused property funds management groups at the forefront of this shift has been ESR Australia, which raised $1billion for its ESR Australia Development Partnership (EADP) from foreign institutional investors during the 2020 Covid-19 lockdowns.

This timing proved fortuitous given the subsequent boom in e-commerce and restructuring of supply chains, further increasing tenant demand and investor appetite for industrial real estate to unprecedented levels, ESR said.

In the last year, other property funds management groups have also been tapping foreign investors for new funds with development capabilities, including GPT for Quadreal and Stockland for JP Morgan Asset Management.

In light of the positive impact that foreign capital has made on the Australian property sector, it is essential to remember that these sovereign wealth funds, pension funds, and global investment groups have options to invest their capital elsewhere across the Asia Pacific region.

These investors typically choose to invest in Australia over other competing markets such as China, Japan, Korea, and Singapore because of Australia’s strong economic growth, stable legal and policy framework, and open foreign investment policies.

ESR Australia credits its swift and substantial growth in the local market through leveraging long-standing relationships built over time with global institutional investors such as GIC, M&G, Townsend and China Merchants.

As APAC emerges from the pandemic and further opportunities for pent up capital to be unlocked present, other Australian developers will be faced with the onus and opportunity to think bigger in brokering relationships and subsequent deals with foreign partners.


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Charter Hall gains northern exposure

Charter Hall

Charter Hall has paid $19.7 million for an industrial property at Brendale, in Brisbane’s northern suburbs, an area increasingly attracting institutional investor interest.

JLL director of industrial Nick Bandiera, who brokered the sale with colleagues Sam Byrne and Tim Jones, said the 5-hectare site offered passing income and development potential.

“The large scale and underutilised nature of the property appealed to Charter Hall, given its current industrial use, with the future capability of developing the site to a higher and better use given its broad zoning,” Mr Bandiera said.

“The north side has historically been predominantly privately owned. However, we are seeing a shift in that balance as tenant demand and scale continue to grow.”

“The northern Brisbane industrial market is experiencing strong inflows of institutional capital, which is set to reshape the landscape over the next few years.”

Owned by a syndicate of Victorian-based investors for decades, the site at 23-25 South Pine Road is adjacent to Strathpine Train Station, a major stop on the $1.15 billion Moreton Bay Rail Link.

“The property is primarily leased to international logistics and shipping company Wallenius Wilhelmsen Solutions, which uses the facility for the storage and assembling of agricultural and logistics equipment,” said JLL’s Sam Byrne.


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Cromwell Spends $185m on Golden Triangle Tower

ISPT has sold its recently renovated tower in Brisbane’s golden triangle for $184.7 million to Cromwell Property Group for its DPF fund.

The 24-storey office tower at 100 Creek Street, Brisbane has a net lettable area of 20,223 square metres.

It is the second purchase for the fund in Brisbane after it secured the former Flight Centre headquarters at 545 Queen Street for $117.5 million in May.

Meanwhile, Cromwell Funds Management Limited sold its nine-storey Icon office tower in Ipswich for $144.9 million a month ago.

The Creek Street building has a mix of tenants, a 6-star NABERS indoor rating, end-of-trip facilities and floor-to-ceiling glass panelling.

The sale follows another golden triangle transaction, in August, when Fortius Funds Management and PGIM bought a similar sized building at 307 Queen Street for $214 million.

The surge of transaction in the area comes as Brisbane occupancy drops to 51 per cent, according to the Property Council of Australia.


▲ The golden triangle is bounded by Edward, Queen and Eagle Streets and is a financial district in the Brisbane CBD.

Cromwell head of retail funds management Hamish Wehl said it was a landmark building and stellar addition to the fund.

“The asset has a sensational location, benefits from great amenity and has been recently substantially refurbished,” Wehl said.

“It’s earnings accretive to DPF and will support the fund’s long-standing track record of paying unitholders a regular reliable income.”

ISPT spent $10 million upgrading the 100 Creek Street building in 2018, giving it new bathrooms, a semi-open foyer as well as creating a French provincial style laneway market.

The direct property fund has an annualised distribution yield of 5.4 per cent with nine office assets in Queensland, NSW, Victoria and the ACT.

The acquisition is subject to Foreign Investment Review Board approval and is expected to settle towards the end of November.



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Hope Island’s Peninsula Collection apartments show great appeal to interstate and international investors

Peninsula Collection

The Peninsula Collection has 63 apartments, starting from a low $565,000 for the three-bedroom apartments

The ASX-listed ASF Group have released the final opportunity to buy in their unrepeatable gated Hope Island community, The Peninsula.

Peninsula Collection is the final instalment of apartments in the master-planned development on Harbourview Drive, which is located in the highly sought-after Hope Island Resort.

ASF has already sold out Peninsula Homes, a collection of 17 townhouses, Peninsula Residences, comprising 40 apartments, and Peninsula Terraces, just 22 terraces, which sit along side the Peninsula Collection.

The Peninsula Collection has 63 apartments, starting from a low $565,000 for the three-bedroom apartments. Since the official launch of Peninsula Collection last month, more than 10 apartments have already been snapped up

They’re likely to be popular with investors, particularly internationally, with Hope Island Resort featuring Foreign Investment Review Board (FIRB) exemption. This gives investors a global re-sale market for future capital returns seldom found in other developments in Australia.

The project is also offering a three-year rental guarantee of five per cent per annum, along with the option for property management services.

Hope Island apartments have seen 3.8 per cent price growth per annum over the past 10 years, according to SQM Research. In the last 12 months, apartments have seen 16.5 per cent growth.

This can be attributed to a number of factors, not least of which is shortage of supply. According to property consultants Urbis in 2019, The North Shore precinct, which includes Hope Island, was the most undersupplied market on the Gold Coast for apartment buyers. A situation which hasn’t see much improvement until recently with five new apartment developments set for Hope Island.

Rental stock has also remained extremely tight on Hope Island.

The 2032 Brisbane Olympics announcement is also backing up this data, ensuring investment from both private and public sectors upwards of hundreds of millions of dollars in infrastructure and more in the near and long term.

Peninsula Collection

Peninsula Collection 52 Harbourview Drive, Hope Island QLD 4212 

Three-bedroom apartments in Peninsula start from $565,000, below the suburb median of $579,000, according to SQM.

Rents have also been on the rise with rental asking prices up 24.8 per cent in the past year and 4.4 per cent per annum for the past 10 years.

‘The Peninsula, as an exclusive gated community development on Hope Island Resort’s unique river canal, is located within one kilometre of three golf courses, across the road from the Azzura Greens Resort and Links Hope Island Golf Club.

It’s one of the closest new developments near the Hope Island Shopping Centre, reachable on buggy or foot.


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