FOREIGN investors have significant confidence in the future of the Brisbane commercial property market, according to the Australian Property Institute (QLD) and Knight Frank Valuations Queensland.
The API – Knight Frank study showed foreign purchasers had expensive taste, averaging almost $151 million per transaction for office buildings during 2010 and 2011.
API (QLD) president & Knight Frank valuations director Philip Willington said this far exceeded the average of just under $54 million paid for office buildings by local investors in the same time.
“Whilst foreign purchasers made up 15% of transactions by number, they made up 33% of transactions by value,” he added.
The value of their purchases during the two years was over $754.27 million from five transactions out of the 34 recorded transactions with a total value of $2.314 billion.
Four of the five foreign investors were based in Europe and Asia.
The API – Knight Frank study also found that these four properties purchased by the overseas investors were for very similar assets.
Willington said they tended to be new buildings, which meant there were no structural issues to be concerned about.
“They also had excellent covenant tenants and a relatively small number of tenants for ease of management,” he said. “The long-term average lease expiry profile was of 7.5 to 10 years, which does not require active asset management in the short term.”
The buildings also had maximum green building and energy ratings.
Willington said the location of the buildings did not seem to be of high importance to these purchasers provided that the remaining investment criteria were met.
“The evidence seemed to suggest that these foreign investors have significant confidence in the Brisbane commercial market.
“Presumably, they also see that our political climate is stable, relative to other parts of the world and that there are no sovereign risks to the security of the asset,” he added.
Willington added they did not appear to be concerned about currency risks attached to the high value of the Australian dollar at its present levels.
The remaining foreign-bought property was purchased by a New Guinean national group understood to have used royalties from gold mining activities.
“It was a much smaller asset than the other four properties, and most probably reflected their more limited capacity to purchase larger single properties,” said Willington concluded.
Property Review
