USA & Japan fuel $17 billion boom in Australian real estate focused on living, industrial assets and data centers

Investment flows into Australian commercial real estate are likely to be dominated by the USA and Japan in 2025, with Singapore also becoming a more important regional player. That’s according to Andrew Cannane, senior executive director and head of Real Estate, Asia Pacific at CSC.

Cannane was discussing trends in foreign capital investment into Australian real estate on a panel at the recent PFA 2025 Conference on the Gold Coast.

He said foreign institutional capital flows into real estate during 2024 were dominated by investors from the USA, totaling $13.6 billion for the year. “The USA was by far the largest foreign investor into Australian real estate. It was followed by Japan with $2.3 billion, a resurgence of investment activity into Australia after a long period of inactivity. The third largest source of capital was Singapore, with just over $1 billion. 

“Singapore is undoubtedly the gateway jurisdiction for pan-Asia Pacific investments, where we see the majority of general partners and limited partners globally and regionally establishing their headquarters.”

So, what is this capital buying? Cannane said capital is still largely directed towards industrial assets. “Around 70% of foreign capital is targeting industrial property, which of course includes the hot asset class of data centers. This is closely followed by office real estate. 

“This is perhaps another sign that the office segment has bottomed for this cycle, and investors are identifying value in this asset class again.

“Another key trend is investment into land lease communities, as an option in housing and industrial assets.”

While most signature transactions in 2024 came from the USA, with none more significant than Blackstone’s Airtrunk purchase, the return of Japan as a significant investor into Australia has been a talking point. 

“Japan’s refocus to invest in markets such as Australia has been perfect timing at a time when Australia needs investor capital to support its expansion plans. Japan is expected to continue their investment into Australia in the year ahead as further Japanese investors look offshore to exposure to quality property assets at a time of global uncertainty.

“Australian commercial and residential real estate is finding an ideal counterparty as Japanese investors seek stable rental revenue streams and capital growth.”

Some notable deals include Mitsui Fudosan’s $1.3 billion acquisition of a two-thirds stake in a Mirvac Sydney office tower, located at 55 Pitt Street. Japan’s Hankyu Hanshin Properties Corp., together with a Malaysian investor, also poured $536 million into a portfolio of 11 industrial assets run by ESR Group.

Cannane said leading Australian real estate companies are currently scouring Japan for partners to invest. “Japanese capital tends to be more patient, and forming joint ventures allows them to do more projects. 

“Japanese investment in real estate is evolving with the first wave of large companies now being followed by a second tier of small investors, and increasingly, a third tier of even smaller ones.”

He said some of the larger Japanese investors might take a stake in an asset in Australia and then look to syndicate or sell it down to fellow Japanese investors in Japan.

Cannane said Singapore is likely to become even more influential for Australian commercial real estate, following an influx of regional family offices, decision-makers, and headquarters moving to Singapore.

“There have been more than 1,000 family offices set up in Singapore in the last three to five years.

“But more broadly, we are seeing the balance of decision-makers in the APAC region shift towards Singapore.”

When it comes to attracting capital from foreign institutional investors, Australia and Japan are both extremely well placed in Asia Pacific. “In terms of great institutional investment, it largely comes down to Australia, New Zealand, Japan, Singapore, and Hong Kong.

“The Singapore and Hong Kong real estate markets, whilst transparent and attractive, are not as liquid with less stock available for sale when compared to Australia or Japan, which can make access to large-scale deal flow more challenging. So that’s a great opportunity for Japan and Australia. 

“Australia ticks all the boxes in terms of transparency, rule of law, ability to get money in and out, and a proven tax regime. And it means Australia and Japan are front and center in terms of APAC allocations,” Cannane said.

Disclaimer: This content is provided for information purposes only and does not constitute legal, tax, regulatory, accounting, or other professional advice. 

PFA members benefit from access to networking and educational opportunities, industry research, and greater connection with the unlisted property funds industry – click here to find out more.