Investing in Australia: a market overview
Since 2011 Fidinam Clients have invested in Australian commercial real estate. In 2013 Fidinam opened its Australian office in Sydney, and since that time has worked with its clients in building a robust commercial property portfolio, with a current value of circa $500m AUD. The Australian office is unique to other Fidinam offices in the region, as we are the only office to provide a complete real estate advisory and management offering.
Why Investing in Australia
Australia over all is resilient economy, with strong governance and a Western based legal system. It is the 14th largest economy in the World and current AAA rated with a stable outlook by all three global rating agencies. Geographically placed within the growing Asian region will continue to support long term growth and development of Sydney and Melbourne as Apac financial centres. Apart for our position in the global economy, more granular reasons to consider investing in Australia are:
Historically strong income returns on investment of between 5% and 8% per annum over the past 10 years
- Growing population- Immigration plays a large part in the success of Australia, while the current boarder closures have impacted on this growth, this is only short term, with net overseas migration the largest growth factor for population growth
- Stable political system – having enjoyed over 28 years of economic growth, over all good fiscal management, the increases in government spending and infrastructure investment will be positive for Australia’s long-term outlook.
- Supply and Demand- In the most of major capital cities there are constraints on developable land, Sydney, Melbourne, and Brisbane have become geologically constrained within their central business districts. This may be some what alleviated by the large infrastructure spend on public transport, and a more flexible working environment as a result of the COVID pandemic.
- Lower risk profile- while all markets have cycles of positive and negative returns, on a risk adjusted basis cities like Sydney and Melbourne experience lower vacancy rates that other global cities like New York, Singapore and Seoul.
- Asset types- investing in Australian property is closely correlated to the economy. Currently we have boom in logistics due to the move from brick and mortar retail to online retail distribution. Retail as an asset class have underperformed, due to reduced foot traffic and lower spending patterns. Commercial relies on white collar growth and to date has been resilient, however the effects of changing work practices may place some short-term risk on this asset class. Hotels will perform well once the boarders have reopened. Australia over all has a shortage of quality hotel accommodation.
Fidinam (Australasia) Real Estate
Fidinam (Australasia) Real Estate provides a wide range of real estate services to its clients, including the following:
- Capital Transactions- Source relevant real estate investment opportunities, across multiple asset classes (Office, Industrial, retail, hotels and residential) across all major Australia states. Typically, we work on a client-based mandate with a strict criteria, assets values start from $5m AUD.
- Market Research and Feasibility Studies- we provide market-based research on various real estate markets in Australia, as well as the development of robust financial models on potential acquisition targets.
- Real Estate Strategy-Development of real estate strategy to suit the investment objectives of the client(s), including but not limited to, major building upgrades, highest and best use analysis, income and capital growth, and market positioning.
- Advisory- We advise a broad range of clients on identifying the right location for there business, lease negotiation, financial modelling, market research and project management of fit outs and or building upgrades
- Asset Management- We are part of the life cycle of the asset, from the date of acquisition to the date of disposal, we mange every aspect of the building, including income and cost management, property accounting, tenant lease negotiations, tenant relationship management, management of external service providers, building compliance, financial and commentary reporting, tax management and debt services.
- Project management- We provide project management services, for capital expenditure upgrades, tenant fit out, base building refurbishment, and tenant make goods.
Investing in Australia, like with most international markets, requires on the ground expertise, to understand local dynamics, ensure you have good data and research, extensive networks of real estate brokers and building owners to access opportunities and service provides to ensure you have the best possible opportunity to secure the right investment. Key markets Fidinam focus on include:
- Sydney- A well established and the largest overall real estate market in Australia. Sydney is a favorite for global investors, who are looking for a safe relative high yielding investment. Key asset classes to invest in Sydney are Industrial/logistics, commercial office, and high end residential.
- Melbourne- Like Sydney it is a well-established real estate market, and its central business district is likely to overtake Sydney over the next 5 years. Over the past 15 years Melbourne has dominated population growth, and this if forecast to continue, with jobs growth once the COVID period ends outstripping the rest of Australia by a substantial margin. Key asset classes to invest in include industrial/logistics and CBD office buildings.
- Brisbane- The river city, is Australia’s third largest CBD, and one of Australia most livable cities. A constant investment in public transport, tourism and access to mining provides for a strong economy. Attractive investment returns and lower cost of living make this city one to consider for long term investment. Key asset classes to invest in are industrial/logistics, high end residential and hotels/reports.
- Canberra- The Capital of Australia, and closely correlated to government. This city has the highest percentage of Government tenants across Australia. Canberra is located between Sydney and Melbourne, and like other major Australian cities has invested greatly in public transport infrastructure. Key asset classes to invest in are CBD commercial office and residential.
- Perth- Australia’s most Western located city, and the closest major city to Asia. Perth is closely aligned to the resources sector and prospers from booming resource markets. Over building in the last development cycle has kept rents lower and vacancy rates higher, however this is expected to change over the next few years. Key asset classes to invest in are CBD office, hotels and residential.
Australia Real Estate Market
Australia has a deep and fully transparent real estate market across all sectors of residential, commercial, industrial, retail hotels, aged care, student accommodation and multifamily assets. However, timing on entry is important. The recent Pandemic has created a polarized outlook, and while there is dislocation there creates opportunity. It is expected that there will be a surge in opportunities over the next 6-12 months, providing quality investment opportunities for those looking to invest for the longer term. Fidinam’s local team can assist with setting your Australian real estate strategy. However, prior to undertaking your investment search, it is important that you are aware of the need for Foreign Investment Review Board Approval (currently taking 30 to 180 days), the correct investment structure, tax treatment, and borrowing money in Australia.
Matthew Burrows, Managing Director at Fidinam (Australasia) Real Estate. Get in touch with Matthew by filling the form below!