Blackstone Predict New Opportunities in Australian Commercial Property

Blackstone, the world's largest real estate investor do not see Australia's commercial real estate market as overheated as many analysts do, suggesting that global volatility will continue to create new investment opportunities in 2016.

The firm's global chief investment officer for real estate, Ken Caplan said: "We bought a half-interest in Southern Cross not long ago, so we continue to see opportunities [in Australia]. We still see it as an interesting time to be investing. Australia has done well for us. We like the investment and would like to do more".

In December last year, the private equity giant bought a half share in the Southern Cross office complex in Melbourne for AUD675m, with Canadian giant Brookfield owning the balance. Analysts have speculated that the yield of just over 5% is a new benchmark for the Melbourne office market.

Globally, Mr Caplan expects the pace at which yields have tightened to slow after the strong run real estate has had in recent years. However, he did not see interest in Australia abating, rejecting talk of a commercial property bubble. "I see a lot of reasons why Australia will remain a place that investors will want to invest capital into real estate".

Blackstone has more than AUD5bn of property and AUD1bn of real estate debt in Australia. In 2015 the group made its first push into the Australian real estate debt market, buying $750m of Australian loans as part of its USD26.5bn to purchase General Electric's global real estate assets.

"It does feel like we are in an environment where we will see more interesting opportunities. And having the dry powder across the firm of USD85bn [funds available globally across asset classes] means we are able to take advantage of this," Mr Caplan said.

Blackstone has been most active in Sydney and Melbourne office and retail property and according to Mr Caplan, "That's where I expect we will continue to be most focused".

Increased investment activity in commercial real estate markets is generally a precursor to increasing prices in the residential sector. That's why savvy investors pay close attention to the activity of the investing giants like Blackstone for indications of where smart capital is flowing and seek opportunities locally.

Opportunities to invest in commercial real estate around the world are becoming more widely available through crowdfunding platforms and real estate trusts, with entry levels at more affordable ranges for retail investors.

The commercial sector of global real estate markets is expected to see significant growth in the next 12 months, as more economies achieve stability or seek to stimulate growth through investment in business.