International investors set their sights on Canberra's commercial market

Canberra may be moving into the sights of overseas investors as first choice favourites, Sydney and Melbourne, become increasingly crowded and commercial yields in those markets continue to compress.

A CBRE report, New Channels for Old Favourites – Fresh approaches to investing in Australia, Japan and Vietnam, says tier two cities like Canberra, Brisbane and Adelaide are likely to become the beneficiaries of a widening focus from international investors.

CBRE Canberra managing director, Michael Heather, cautions that doesn’t necessarily mean Chinese investors.

“We really don’t have the critical mass for the really big Chinese investment firms,” he says.

“But there are certainly plenty of funds manager and so on from other countries who are always on the lookout for secure, long-term investments.”

Heather says there is already plenty of foreign capital invested in Canberra’s commercial sector.

“South Korea has a particularly strong appetite for our assets and Singapore, Switzerland and Germany are all active locally,” he says.

In fact, a South Korean investment group was reportedly behind the $321 million purchase of 50 Marcus Clarke Street, an all-time record for a Canberra office building.

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It was reportedly sold to Mirae Asset Global Investments earlier this year, but its foreign ownership began five years earlier.

The Walker Corporation developed the building in 2011 and sold it for $232 million to Singaporean investors, CIMB, in March 2012.

Tuggeranong’s Louisa Lawson Building, which is leased to the Department of Human Services, sold to South Korean property investors, FG Asset Management, for $225 million in 2015 while, overall, Asian investors made up about 37 per cent of buyers in the Canberra commercial market between 2010 and 2016.

“Canberra is viewed as very safe, politically stable environment where many of the assets are headquarter-like properties with long-term government tenants,” Heather says.

The CBRE Canberra chief also notes the credit environment has tightened over the past few months and investors are now needing to inject more capital into their acquisitions.

“The Loan to Value Ratio has lowered, but lenders are still very active and secure assets are still considered favourably,” he says.

Heather says CBRE is proactive in presenting Canberra opportunities to a global investment community.

“We’ve got a long reach and the ability through other offices and promotional roadshows to get our proposals in front of the right people wherever they are,” he says.

“Globalisation, connectivity and even initiatives like direct flights to and from Singapore all contribute to the ability to market Canberra’s commercial opportunities.”