Offshore money back in property market
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Offshore money back in property market

Continuing interest in Melbourne properties from Asian buyers has diminished fears of an offshore investment squeeze in the sub $50 million market.

According to a new publicly available Australian National University database, Chinese investment in Australia slumped 40 per cent last year following Beijing's crackdown on offshore acquisitions and Canberra’s tougher enforcement of foreign ownership laws.

But while the investment flow has stemmed, the tap has not turned off.

Developer Lascorp and Herzog Group, the owners of a significant Abbotsford industrial site on the Yarra River, have offloaded the property to an Asian investor for around $37.2 million.

The Abbotsford Exchange building.

The Abbotsford Exchange building.

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The Abbotsford Exchange building, tucked behind the Carlton and United Brewery factory on a bend of the river, was the last asset in a jointly owned industrial portfolio Herzog and Lascorp had compiled together.

“It was a great investment property with a phenomenal future. The partnership was happy to call it a day and move on,” Lascorp director Michael Lasky said.

The red brick building and associated open air car park sold to a Chinese entity with a local presence, he said. It was transacted by CBRE’s Mark Wizel and middle markets team.

The industrial-zoned property is leased to Australia Post until 2028, along with industrial software firm Honeywell until 2021.

The post office uses the two-level building at 45 and 50 Grosvenor Street for its parcel and mail handling operations.

The facility transacted on a yield of 5 per cent.

The sawtooth industrial warehouse was originally constructed for the Weston’s Biscuit Factory business in the 1950s and used by the company until the early 2000s.

Lascorp has a development pipeline of multiple regional shopping centres under its belt.

The sale follows a listed Malaysian group swooping on the Habitat backpackers hostel in St Kilda Road in a deal that saw the 2540 square metre corner property transact for $16 million.

The Malaysian purchaser fought off interest from several local developers to acquire the site.

The deal highlights Asian interest in Melbourne development sites, CBRE’s Chao Zhang said.

“Six of our past seven site sales have involved Asian developers who are looking at macro factors such as Melbourne’s strong population growth when pursuing new acquisitions,” Mr Zhang said.

Nearby in St Kilda’s Fitzroy Street, the former Gatwick Private Hotel is being given a luxury makeover by contestants on Channel Nine’s blockbuster reality renovation show, The Block.

Mr Wizel said investment funds were making their way into the country from China via family links.

“There is absolutely no doubt that Chinese off-shore investment has declined significantly over the last 12 to 18 months but it now seems clear that Chinese money has begun to flow again and particularly within the sub $100 million market,” he said.

“How significant that is we will see over coming months, particularly towards the end of the year and into the new year with the conclusion of transactions.”

Property Editor at The Age and BusinessDay journalist for Fairfax's theage.com.au, smh.com.au, watoday.com.au and brisbanetimes.com.au.

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