After a landmark year in 2021 of commercial transactions, 2022 has seen a distinct slowdown given the rapid changes in interest rates and rising bond yields putting the brakes on many financiers and investor confidence. Australia, however, does continue its reputation as a safe haven for investment given its economic and political stability making it an attractive market to invest in for all.
Australian commercial transactions were at their highest during quarters two to four in 2021, these periods alone representing $83.7 billion in sales bringing the calendar year sales volume up to $96.7 billion. The REIT and Listed space being the greatest accumulated of assets with over $7.8 billion in net acquisitions while insitutionals and offshore activity were also robust. Taking advantage of rapid price rises and lowering investment yields, private buyers jumped out of the market disposing of more than $40 billion worth of assets however this segment were also competitive investors. Buyers, particularly private syndicates and first time investors looking for diversify their investment portfolio, despite this, the mismatch still saw more than $8 billion in investment leave the private sector.
Fast forward to 2022 and fundamentals are changing; through to the end of August 2022 $48.6 billion has been invested in the commercial property sector. NSW was the location of choice to invest in, accounting for 43.3 per cent, its share up 5 per cent on last years results. Victoria similarly has increased its holdings on 2021 results, now 27.8 per cent, while markets such as Queensland and WA, which were attractive last year due to their strong population gains, economic growth, and future potential, have now slowed. Looking at asset classes, the confidence in office assets has returned while industrial sales have now moderated after a standout 2021, while retail, hotels, and medical/aged care have all seen uplift in activity this year too.
Importantly the flows of capital are at a significant turning point, the big buyer of 2021, REITs retreating rapidly this year selling more than they are buying. While both institutions and offshore players continue to sell down assets, they continue to grow their commitment to Australian commercial property. International buyers in particular have growing confidence in our local market, with the USA and Germany being the regions which represented growth in investment this year, while Singapore, China, and Hong Kong have decreased their economic commitment to Australian property significantly.
Private buyers make up a sizeable proportion of our commercial property universe, the changing dynamics of this buyer and seller group indicative of their understanding of the cyclical nature of our property market. Capitalising on strong yields and increases to capital returns together with availability of finance, these investors were quick to sell in 2021. While this trend has continued again this year, the extent has been far less. As market conditions move, we are likely to see private investors become net purchasers, capitalising on emerging opportunities and stress of owners who may have purchased at peak rates last year. Similarly, as bond rates grow, the spreads will become increasingly unsustainable for some property owners which will benefit the private sector and their ability to move quickly when opportunities present themselves.
