The View | Asia’s commercial property capital markets have come of age

Recent deals such as a Chinese investor’s acquisition of a shopping centre in Melbourne show a more discerning, sophisticated base across the region

Asian capital is also a powerful force on the global stage, and the region’s investment markets are providing a solid basis for confidence

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A pedestrian passes a construction site for a commercial building in the Pazhou area of Guangzhou on May 9. Mainland China has emerged as a favourite destination for commercial property investment since Beijing ended its zero-Covid policy, taking in a fifth of outbound capital from Singapore, one of the Asia-Pacific’s leading investment sources. Photo: Bloomberg

Published: 10:00pm, 15 May 2023Updated: 12:47am, 16 May 2023

In the grand scheme of things, the sale earlier this month of Village Lakeside shopping centre in Pakenham, a suburb of Melbourne, for a reported A$25 million (US$16.6 million) might seem like an insignificant transaction.

In the first quarter of this year, commercial property investment in Australia stood at US$2.9 billion, and this was 72 per cent lower than in the corresponding period last year. For the Asia-Pacific region as a whole, transaction volumes last quarter reached US$27.2 billion, according to MSCI data.

However, there is more to the sale of the shopping centre than meets the eye. At a time when retail real estate remains out of favour with most institutional investors – mainly because of the shift to online shopping which was turbocharged by the Covid-19 pandemic – the deal underscores the appeal of non-discretionary-based retail.

A neighbourhood shopping centre anchored by a Coles supermarket, Village Lakeside benefits from resilient demand, strong connectivity to consumers and long-term development potential.

That the buyer was a private mainland Chinese investor who requested their name remain anonymous shows how Asian ultra-high net worth capital is playing a more important role in the region’s investment markets. Less sensitive to the sharp rise in interest rates and eager to deploy capital at scale in real estate, Asian private investors are targeting defensive assets providing secure income streams.

Mingxuan Li, head of Asia markets at JLL in Melbourne, said three of the last five neighbourhood shopping centre transactions in the Australian state of Victoria involved mainland Chinese buyers. “E-commerce in Australia still has some way to go. You can’t go wrong with a neighbourhood shopping mall,” Li said.

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.css-1m2rp1p{color:#34b8b5;}The View | Asia’s commercial property capital markets have come of age

The View | Asia’s commercial property capital markets have come of age