Offshore groups continue to circle Sydney’s commercial office market, making up $938.3 million or 45% of the total $2.08 billion investment activity in the first half of 2021.

 Major groups included Singaporean investors ($515 million) followed by Canadian ($400 million).

Last year, Sydney recorded $5.39 billion of commercial office transactions at the end of 2020, indicating the first half of 2021 is tracking at healthy levels at $2.08 million.

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JLL’s Head of Capital Markets - (NSW), Luke Billiau said, “The established real estate markets are set to continue to benefit, as global investors look to allocate a greater portion of capital to the market. Australia remains to be the only geography in Asia Pacific with real estate allocations below target (4% below a target of 11.5%), which will continue to drive cross border capital investment.”

“Investors are divided between core investments with strong tenant covenants and value-add investment assets with leasing upside or development potential which has been particularly relevant in the city fringe and metropolitan markets,” Mr Billiau said.

Sydney commercial office market records $2.08 billion of sales for the first half of 2021.

Assets in the CBD are becoming increasingly tightly held. The New South Wales Metro’s compulsory acquisition of almost 49,000 sqm of CBD office stock across 11 buildings including the A-grade 9 Hunter Street has further increased the scarcity of available stock.

“The scarcity of stock has encouraged investors into other established metropolitan commercial markets including Macquarie Park and Sydney Olympic Park supporting strong demand for prime office investments,” Mr Billiau said.

JLL’s sale of Sekisui House at 68 Waterloo Road, Macquarie Park sold on a yield of 4.84% to a private investor is one example of the appetite to move outside of the CBDs with expectations of long-term capital growth.

Foreign investment levels in Australia’s commercial office market continues to remain at elevated levels. JLL’s preliminary figures for the first six months of 2021 show that offshore investors accounted for 37% of the total $1.87 billion investment activity into the office sector. Singaporean investors continue to be the most active in the office sector, followed by Canada and the U.S.

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JLL’s Head of Capital Markets – Australia, Fergal G Harris said, “National commercial property transaction activity is tracking well ahead of 2020 levels at the half year mark, with JLL’s preliminary figures at $16.56 billion year-to-date.

This compares to the full year sales last year of $20.2 billion.”