Investing in the fifth continent – in a premium location
The acquisition of a grade A property in the Australian city of Brisbane in 2014 marked the start of a new chapter in Union Investment’s international expansion. The building enjoys an excellent location in South Bank, a vibrant business area on the Brisbane River. Exposure to the Australian economy and the Asia-Pacific region provides real estate investors with attractive prospects.
The move was a first step towards tapping into opportunities down under. “In terms of asset investment, our primary focus will be on the ‘big four’ office property markets – Sydney, Melbourne, Perth and of course Brisbane. The acquisition of the Southpoint development in Brisbane sees us entering the Australian market for the first time,” explained Martin Brühl, head of International Investment Management at Union Investment Real Estate, speaking at the time. The Southpoint office and commercial property in South Bank, Brisbane, is a 27,900 sq m multi-tenant building with grade A classification. Handover to tenants is scheduled for the second quarter of 2016 and the property is currently 90 per cent pre-let. The office section is let on a ten-year lease to the Flight Centre Travel Group, while tenants of the retail space on the ground floor, which is currently 30 per cent let, include supermarket chain Woolworths with a 20-year lease. After completion, Southpoint was transferred to the holdings of open-ended real estate fund UniImmo: Europa.
Gaining a foothold in a promising market
With this Australian acquisition, Union Investment moved into an attractive core market for real estate where familiar Western standards meet the Asian growth story. Australia is the world’s twelfth largest economy, and the third largest in the Asia-Pacific region after China and Japan. Alongside attractive initial returns and long-term leases, the advantages of the Australian property investment market include real estate ownership laws based on the Anglo-Saxon model. Most popular among investors are properties with long-term office leases, usually with annual rent increases, and landlord-friendly service charge arrangements. Australia’s “big four” have a lot to offer in this regard. Another benefit of investing down under is the strong exposure of the Australian economy to growth in Asia, and particularly China.
Recent economic data shows that Australia is not only a supplier of commodities, but has also made good progress towards diversifying its economy. “The Southpoint office and commercial building represents a good start. We’re also looking at the hotel and logistics markets,” said Martin Brühl. Approximately 16 months after its market entry down under, the Hamburg-based real estate investment manager tapped into another attractive market in the Asia-Pacific region when it acquired the 155 Clarence Street office building in Sydney for sister fund UniImmo: Global. “Our investments in Australia reflect the strategy we have embarked on with regard to our real estate funds: greater international exposure, younger properties and broader diversification that includes strong regional markets,” said Martin Brühl.