US raiders top Japanese as buyers of commercial real estate in 2024

Big US firms flexed their financial muscle to become the biggest buyers in commercial property this year, but Japanese companies have kept on buying as the year comes to a close.

Investa Commercial Property Fund is selling a 50 per cent stake in 135 King Street, Sydney

Commercial property transactions are making a big comeback with $29.2bn in major deals struck this year – and more deals for ­ office blocks, retail centres and warehouses bubbling away as the year comes to a close, according to real estate firm CBRE.

The US became the top source of overseas investment in 2024, accounting for $3.6bn worth of deals, in a resurgence that could be helped along by the fall in the dollar, with their buying knocking Japanese investors into second place.

Big deals include US group Greystar’s acquisition of a $1.6bn student housing portfolio in one of the largest ever deals in the hot sector, and US group Hines backing fund manager Haben’s purchase of Sydney’s Westpoint Shopping Centre for a record-breaking $900m.

The Japanese groups remained active with $1.9bn in acquisitions, while Singaporean investors ­accounted for deals totalling $1bn.

CBRE said pricing appeared to have stabilised after a period of softening yields, and the office sector staged the biggest comeback, regaining its status as the most traded commercial property sector after $8.4bn in deals.

Major transactions in Sydney, including Mitsui Fudosan’s acquisition of a 66 per cent stake in Mirvac’s 55 Pitt Street development, were key drivers of this uplift, and more are on the way with retail also rebounding strongly and the momentum continuing for industrial and logistics.

Much of the focus this month has been on Japanese property companies as they lock in their status at the top echelon of property markets this year, with Tokyo-listed real estate firm Daibiru chasing a major city tower.

An artist’s impression of 55 Pitt Street.

After a long hiatus since it last bought, the company is after the block at 135 King Street in the Sydney CBD that could trade for more than $600m, in a process that also drew local funds, including AsheMorgan. While the transaction is yet to be finalised, it is one of only a series of forays by Japanese players.

Large Japanese companies have become critical investors in almost all sectors of property and have emerged as partners of big companies ranging from Lendlease, Stockland and Mirvac, as well as a host of smaller players, as the locals need capital to get their projects off the ground.

Just this week, Mirvac and leading Japanese trading house Sumitomo struck up a 50 per cent joint venture to deliver an $830m house and apartments project at West Pennant Hills, in Sydney. The move was Sumitomo’s first property investment in Australia and the start of a long-term partnership with Mirvac.

Corporate Japan is making a measured return to international investing. Instead of taking on risky resort-style projects as they did in the 1980s, they are making longer-term purchases of safer ­assets that spin off more certain returns, including offices and warehouses, while also backing developments by local groups.

They are active with AsheMorgan and its Japanese investment partner MEC Global Partners Asia pursuing a scheme to demolish and rebuild the MetCare Centre at the foot of 60 Margaret Street in the Sydney CBD. They paid about $777m last year to buy the 39-storey office tower and retail centre.

The Investa building in King Street is also well known as it incorporates international retail brands H&M and Platypus Shoes below 23 levels of office space. The parties are working to clinch a deal in which the block would be sold by Investa Property Group’s flagship office fund.

The Investa Commercial Property Fund put a half-stake in the King Street tower on the block in August, but interest in the complex came primarily in the entire asset. Real estate agents Knight Frank and JLL are handling the offer, but they and the vendor declined to comment.

The top end of Sydney’s office market is winning over big investors as space has tightened up in key office blocks, with US investors such as BGO also active, and soaring costs and high interest rates effectively lowering the chance of a wave of new office towers being developed.