Australia attracted more than 25 percent of Chinese capital invested in commercial property worldwide last quarter as investors facing volatile local markets seek refuge offshore, according to CBRE Group Inc.
Chinese investors and developers funneled $4 billion into global commercial real estate in the first three months of 2015, broker CBRE said in a report Tuesday, That’s rising from $10.5 billion for the whole of 2014, of which Australia attracted 15 percent, it said.
“Flows from China to Australia are complemented by growing numbers of Chinese tourists, students, settlers and an increased bilateral trade relationship,” said Stephen McNabb, CBRE’s head of research in Australia. While Australia has been batting above its weight, those factors are likely to underpin investment in the long term, the report said.
The flow of capital from China underscores the Reserve Bank of Australia’s concerns about rising risks in commercial real estate. In its semi-annual financial stability review, the central bank warned the search for yield by offshore investors has driven local commercial property prices higher and yields lower.
“Leasing conditions have remained soft in many local markets, and oversupply is emerging in the Perth and Brisbane office markets,” the RBA said in its March review. “These dynamics increase the vulnerability of the commercial property market to a price correction.”
Inner city development sites, within a 5 kilometer radius of the central business districts of Sydney, Melbourne and Brisbane, have been a primary target for investors, CBRE said. Some 36 of the 116 sites sold in that radius in the 12 months to April 2015 were acquired by Chinese investors: 16 in Sydney, 15 in Melbourne and five in Brisbane, it said.