Press Releases

Renewed Covid Concerns Stifle Domestic Investment in Australian Commercial Property in First Quarter – RCA

Real Capital Analytics / May 5th, 2021

Sydney, 5 May 2021 – Investment in Australian commercial property by domestic investors slumped to the lowest quarterly levels in more than five years, as the worsening pandemic situation early in 2021 blunted recovery momentum, the latest Australia Capital Trends report from Real Capital Analytics showed.

Sales of commercial property in Australia fell by 19% year-on-year in the first quarter to $5.9 billion. Domestic investor transactions were down more than 42% year-on-year to $3.4 billion. Cross-border sales ran counter to the headline trend. Around $2.5 billion of deals closed in the period, which represents 42% of all deals in the first quarter, and 83% year-on-year growth. Cross-border activity could have been higher had Foreign Investment Review Board (FIRB) approvals been expedited for several high value transactions.

North American investors led the acquisitive rebound, representing 60% of all overseas deals. Singaporean investors were also active closing almost $1 billion of deals. Robust offshore activity demonstrates investor resilience to pandemic obstacles. Alongside the drop in income-producing properties, sales of development sites slumped 49% from a year earlier to $1.2 billion. Total deal volume was $7.0 billion, a decrease of 26% year-on-year.

RCA will provide an in-depth view of commercial real estate investment activity across Australia for the first quarter of 2021 on Thursday, 6 May at 11am Sydney time. Journalists wishing to join the webinar can register <here>.

David Green-Morgan, RCA’s Managing Director for Asia Pacific, said: “Momentum in the Australian commercial property sector was diminished by the worsening pandemic outlook globally. While domestic investors paused, offshore investors advanced, particularly North American capital. The trend bodes well for the remainder of 2021. It suggests offshore investors have confidence in both the recovery of the Australian economy and the commercial real estate sector.”

Chart 1: Quarterly Transaction Volume by Deal Type

Softer Pricing Pulling Investors Back into Retail Sector

Retail reported the strongest pickup in quarterly volumes, climbing 26% year-over-year to $1.7 billion, and second only to offices in overall activity. The retail rebound was almost exclusively driven by the sale and leaseback of the David Jones flagship Elizabeth Street store in Sydney with a consortium of Charter Hall managed funds for $510 million on a reported yield of 5%. The transaction represents a significant investment into a sector which for years has been disrupted by structural headwinds. The deal also propelled Sydney retail to second place for the quarter, behind the city’s resurgent office sector. Melbourne’s retail sector was third, registering $633 million in the first quarter, a 150% year-over-year jump.

Retail investment volumes outpaced three of the previous four quarters in Q1, which may indicate investors are enticed by softened pricing relative to other sectors. Investors remain focussed on pockets of strong-performing retail, such as convenience-based retail in inner-city centres and densely populated regional locations supporting neighbourhood shopping centres.

Chart 2: Top Market Segments of Q1 2021

Sydney-led Office Sector Shows Further Resilience

Office investment activity increased to $2.9 billion, compared to $2.6 billion in the same quarter last year, and follows a two-thirds collapse in annual volumes in 2020. The Sydney market led the trend reversal, the bellwether indicator for the overall health of Australia’s office market, with several notable deals closing in the first quarter. The largest deal was the $800 million joint venture purchase of Martin Place South Tower by Investa Property Group and Manulife Financial from the developer, Macquarie Group.

Sydney office deals totalled $2.0 billion in the first quarter, up 77% year-over-year. Brisbane offices was the second strongest office market, recording $344 million in first quarter deals, driven by Ashe Morgan’s acquisition of 310 Ann Street for $210 million from Cornerstone Properties. Perth offices rebounded with $295 million in sales, led by GIC’s purchase of a 25% stake in the Chevron HQ building for $220 million from Brookfield, which retained a quarter stake.

Industrial Sector Fails to Maintain Momentum

Deals in the industrial sector, the star-performing segment since the onset of the pandemic, notably lagged. Transaction volumes were down 58%, compared to the same quarter last year, as investors eyed a handful of mega portfolio trades, including the Blackstone Milestone Logistics portfolio (with pricing reportedly around $3.8 billion).

Elsewhere, activity was limited. Hotel deals were held back by travel restrictions and uncertainty over the timing of border re-openings.

Benjamin Martin-Henry, RCA’s Head of Analytics, Pacific, said: “The pickup in retail deals is a fillip for the sector. It shows how investors are being enticed back with softened pricing to the sector which for so long has been battered by structural headwinds, such as ecommerce.”


Note to editors:

All values in Australian dollars.

Real Capital Analytics (RCA) launched Australia Capital Trends in February 2021, adding to its suite of industry-renowned Capital Trends reports. Australia Capital Trends is a quarterly report covering deal pricing and volume data across the property types, cross-border and domestic capital flows, and rankings of top deals and players.

Real Capital Analytics (RCA) is the authority on the deals, players and the trends that drive the commercial real estate investment markets. Covering all markets globally, RCA delivers timely and reliable data with unique insight into market participants, pricing, and capital flows. The most active investors, lenders and advisors depend on RCA’s market intelligence to formulate strategy and to source, underwrite and execute deals. An industry pioneer since 2000, RCA has offices in New York, San Jose, London, Singapore, and Sydney. For more information, visit


Ong Chor Hao
WATATAWA Consulting
+65 9627 2674

Lee Jing Hong
WATATAWA Consulting
+65 9691 1501