Global property investors in an industry survey placed Melbourne and Sydney to the second and third spot just following London for the most favoured markets in 2016, Financial Review reports.
Among 600 investors composed of private equity, property companies, REITS, funds, institutions and sovereign wealth funds, London takes the top spot as surveyed in Colliers International's 2016 Global Investor Outlook, while New York lands the 4th spot for preferred markets overall.
The survey was intended to include investors managing a total asset of $1.5 trillion and also takes note headline deals from overseas investors this year.
One of which is equity giant Blackstone and its recent deal of acquiring half of Melbourne's Southern Cross towers complex for $675 million. Also among the headline deals by offshore buyers this year was Singapore-based Ascendas' $1 billion acquisition of the GIC/Frasers Australand portfolio.
According to John Marasco, managing director for capital markets and investment services of Colliers, the survey results reflect the 2015 figures, which put Sydney on the third spot just behind London and Manhattan when it comes to the volume of investments from overseas investors.
"Sydney is considered a global gateway city so for investors it ranks up there with New York, London, Singapore and the like in terms of being an attractive destination for investment," he said.
"Melbourne is not far behind, and is seen as a good alternative to Sydney."
"Tenant demand is improving in both Sydney and Melbourne, with rental growth now occurring and vacancy rates reducing. This only adds to the appeal of these markets."
The year 2015 has been great for real estate investment and is even expected to hit a record high. Meanwhile, for direct real estate investment, it is still the domestic investors who dominate the market.
One third of total investments are coming from offshore, with China dominating the Australian commercial property for offshore investments.
"Right now, Australian investors prefer to invest locally and we see very little investment offshore," Nerida Conisbee, Colliers national research head.
"This is very different from the previous cycle where Australia was the third strongest investor globally.
"This is beginning to change, with Australian superannuation firms starting to purchase properties offshore. It is, however, unlikely that we will see the same levels of offshore investment as we saw previously."
Certain super funds headed offshore includes AustralianSuper, investing in US office towers, a major shopping centre in Honolulu, and a mixed-use project investment in London.
