Foreign investors have been playing a leading role in the Sydney commercial office market, particularly in Macquarie Park with a total of $951 million invested into the precinct in 2020 with offshore groups contributing to 95% of the precinct’s total.

As a result, liquidity returned to metropolitan office markets in mid-2020 with several benchmark transactions for long WALE product in Macquarie Park. Four transactions above $100 million were recorded in 2020 including the Keppel REIT acquisition of the Pinnacle Office Park for $306 million, while AEW purchased 2 Banfield Road for $144 million.

This year, foreign investment volumes in NSW for Q1 2021 totalled $915 million (62% of total activity), much higher than the Q1 2020 total of $390 million (41% of total activity).

As the CBD’s across the country got busier, as has the investment focus with three assets in Q1 2021 that were purchased by foreign investors in Sydney’s CBD. 50% of 60 Carrington Street sold to real estate manager, Marprop, 39 Martin Place sold to Canadian based financial services firm, Manulife in a joint venture with Investa and a one-third stake in 1 Bligh Street sold to Singaporean investment group, Mercatus in partnership with Dexus. The $700 million AMP Capital managed Swiss Re portfolio sale peaked the interest of a number of offshore groups.  

JLL’s Head of Capital Markets –(NSW), Luke Billiau said, “Primarily offshore capital sources continue to be attracted to the long WALE thematic, while others broadened their investment mandate during 2020 to include assets located in metropolitan markets that have strong lease covenants.”

“Macquarie Park was one of the most active markets in Sydney amongst foreign groups in 2020 due to the market being  exposed to growth sectors of the economy, including new public transport infrastructure to improve the accessibility and connectivity to and from the CBD,” Mr Billiau said.

In 2020, offshore investors accounted for $3.5 billion or 65 percent of investment activity across all Sydney office markets.

“We have experienced a marked change in appetite for office opportunities in the Sydney CBD and the transaction volumes to date illustrate a continued interest from offshore capital,” Mr Billiau said.

Out of total investment activity in 2020 ($5.33 billion) for Sydney’s office markets across all buyer groups, a higher proportion was invested into non-CBD markets ($2.7 billion or 51%) when compared to the 10-year average of 33%.

According to JLL’s annual ‘Office Investment Review & Outlook 2021’, the low divestment levels from foreign investors in 2020 demonstrated the value placed on the defensive nature of the Australian office sector during the pandemic.

Sydney office market transaction volumes totaled $5.33 billion, or 53% of the total Australian office sector volumes, supported by a number of benchmark transactions in the Sydney CBD.

A 50% stake was acquired in Grosvenor Place, 225 George Street for $925 million – one of the largest single asset office transactions in Australia’s history.

To request a copy of JLL’s annual ‘Office Investment Review & Outlook 2021’, please email JLL’s Head of Capital Markets –(NSW) Luke Billiau via the contact form below.