Offshore capital continues to show confidence in Australian real estate

Australian commercial real estate experienced a surge of inbound capital during 2025, and there are several good reasons why offshore investors continue to show confidence in Australian property, according to Benjamin Martin-Henry, Head of Private Assets Research, Pacific at MSCI.

Martin-Henry, along with Greg Preston, Managing Director of Preston Rowe Paterson, discussed commercial real estate in late 2025 for the PFA podcast, covering several current issues and trends in the Australian market.

Martin-Henry said: “I’m not going to break out crystal balls, but we’ve hit that point in the cycle where everyone’s like ‘let’s buy some real estate’. 

“Yes, there was a pause on interest rate cuts, and that might slow down some transactions. But I think overall the fundamentals are improving enough, and the value change has been enough to get people back into the market.”

Greg Preston says this is in line with NAB’s property sentiment index, released in November 2025. “We actually participated in that survey, and they surveyed people across real estate, all the main real estate firms, valuers, and a lot of the owners, and they’ve certainly got 12-month and 24-month prognoses trending upwards, which is really great compared to where we’ve been over the last five or six years”, Preston said.

Martin-Henry said offshore investment during 2025 was back to the levels last seen in 2022, when a big influx of overseas capital came into Australian commercial property, with offshore capital accounting for more than 50 per cent of deal volume in 2025. 

He said inbound capital “…usually accounts for that 34 per cent mark, so overseas investors have clearly put Australia back on the radar.

“US investors are back to being the number one source of overseas capital. Canadian capital is also pretty high. So it’s interesting to see a lot of north American capital come back to Australia.

“It’s kind of back to those 2022 levels where we saw a big influx of capital.

“Interestingly, I’m very happy to see that the buyers out of Japan continue their streak of activity. They seem to be a lot stickier. 

“Japan was the number one source of capital in 2023 and in 2024. In fact I think they had deployed more in those two years than in the previous 25 years combined.”

He said, anecdotally, overseas investors view Australia’s long-term fundamentals as very solid. “Good economy, pretty stable political system regardless of which side you are on, and obviously quite transparent as well. I think those three things are big reasons why we continue to see overseas investment in Australia and I don’t think it’s going to change anytime soon.”

While overseas investors might like Australia’s fundamentals, Martin-Henry said they can find Australia’s different valuation system confusing. “Australian valuations are far more transaction-based – and now the valuations have adjusted because there is more transactional evidence, and valuations have come down in office around 23/24 per cent. That does represent pretty good relative value to the rest of the world.” 

Locally, Mr Preston said while superannuation funds usually hold between 8-12% exposure to real estate, recent superannuation statistics show property is currently at the bottom of that range, about 8%. 

Martin-Henry said: “Super funds divested out of real estate when it was falling, and that makes sense. But you don’t make your money by buying at the top of the cycle, you make more money by buying at the bottom of the cycle, and it would appear we have hit that for many segments of the industry. 

“I fully expect to see more acquisitions from the super funds this year.”

He also said private buyers are still leading local acquisitions. “[Private buyers] tend to be a bit more nimble, and the capital source is a bit more nimble, and there are fewer hoops to jump through, so they tend to be more active during downturns. 

“We’re seeing a bit more activity in some of those larger ticket items as well, particularly in the office space … people feel we are at or near the bottom for many market segments, and they are actively deploying capital.”

Martin-Henry said that there is a lot of positivity in the world, though some hesitancy remains given current geopolitical and economic uncertainty. “But, like I always say, this is where real estate really shines. 

“In unstable environments, real estate is pretty stable. It’s an inflation hedge, it’s slow moving, it’s steady cash flow. So when the world’s going topsy-turvy putting your money is real estate is not necessarily a bad thing, it’s a pretty good thing, and that might be why we’re seeing a bit more activity this year, and certainly a bit more activity from global investors.”

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