In 2023, we observed only four major office transactions in Sydney’s CBD, totalling $1.6 billion.

The start of 2024 saw little activity in terms of transactions, but it’s noteworthy that the investment market in the first quarter was dominated by Asian capital.

Significant deals include the sale of 255 George Street to Singapore’s Keppel REIT for $363.8 million. 

More recently, in Q2, we have also seen Asian investors active, including a deal in which Japanese investor Mitsui Fudosan acquired a 66% stake in 55 Pitt Street, Sydney.

Asian investors to lead the rebound in investment volumes in Sydney CBD

Following a steady repricing of office values in 2023, we are once again seeing significant interest in Sydney CBD assets in particular from Asian investors, including both established groups and new entrants, such as high-net-worth individuals.

While Japanese capital has been significant predominantly at institutional level, private investors from other Asian countries, including Singapore and China have also played a major role in dominating office sales this year.

The diversity in investment sources underscores a broad interest in the Australian office market from across Asia.

We expect Asian investors to lead the rebound in investment volumes in Sydney’s CBD, attracted by the long-term fundamentals and land scarcity.

We believe Australia’s office market is more stable compared to other global office markets due to several factors, including greater certainty, with most new office buildings pre-committed before construction, the strong regulatory framework, and freehold ownership.

Overall Australia remains a global safe haven for international investors. The country has a stable political environment, a high standard of living, and a well-regulated financial system, which all contribute to its attractiveness.

Additionally, the Australian dollar’s relative stability and the strategic geographical location as a gateway to Asia-Pacific markets make it appealing to Asian investors.

A track record of stability and long-term growth makes Australia an attractive global investment location. Beyond its size, Australia’s market offers strong growth prospects, especially in major cities like Sydney.

The largest and most attractive market within Australia is Sydney, due to its strong population growth and economic diversification, however Asian investors are also looking at other major Australian cities such as Melbourne, Adelaide and the Gold Coast.

Investment activity to pick up in H2 2024

Despite higher interest rates creating challenges in the debt market, investment volumes have been sustained by equity, thanks to the diversity of the buyer pool attracted to Sydney.

Recent offshore office investments have come from Singapore, Beijing, Hong Kong, and Japan. Moving forward, it is likely to be a mix of investors from various Asian countries.

While Singaporean and Japanese funds investors have historically been very active, we anticipate increased interest from private high-net worth Asian investors.

We are also witnessing greater pragmatism around pricing from vendors, and buyers are cautiously optimistic, reflecting a broader sentiment starting to support investment activity later 2024.

I travel regularly to Asia to visit clients in Hong Kong and Singapore, bringing investment assets as well as development opportunities to clients in those markets and helping them build a portfolio of assets in Sydney and North Sydney.

While office buildings have been popular, Asian investors are also showing increasing interest in other asset classes such as industrial/logistics facilities, accommodation hotels and well-located residential development sites.

For more insights into Australia’s Capital Markets, download Knight Frank’s Capital Exclusive report: Capital Exclusive 2024 (knightfrank.com.au)

Links to Knight Frank National Capital Markets insights below:

Sydney a focus for Asian investors, who are returning to the market - By Knight Frank Partner, Head of Asian Markets Australia, Dominic Ong

The capital value correction is close to being complete, with activity now picking up - By Knight Frank Partner, National Head of Institutional Sales and Capital Advisory Ben Schubert

What are the most sought-after assets in Living Sectors in 2024? - By Knight Frank Partner, Head of Alternatives, Tim Holtsbaum

Investment activity in Australia’s capital markets is gaining momentum - By Justin Bond, Knight Frank National Head of Capital Markets

Shifting gear to income growth as property moves past peak uncertainty - By Knight Frank Chief Economist Ben Burston