Aussie cities’ investor appeal wanes

Climate concerns have seen both Sydney and Melbourne fall in their global rankings as attractive real estate destinations, according to analysis from investment manager Heitman.

Sydney fell from seventh spot to 10th, while Melbourne slipped from 17th to 19th (see table).

“There have been some significant positioning changes, partially resulting from relative economic developments, spillover impacts from Brexit and an increased focus on sustainability in this year’s market update,” says John White, Heitman senior managing director, public real estate securities.

Sustainability concerns in particular have impacted the standing of Australian cities.

“The resilience of cities like Melbourne, Sydney and Brisbane and climate-related risks are increasingly top of mind,” White told The Australian Financial Review.

“Our energy policy and climate policy [in Australia] is very much not as developed as what it is in Europe, for example. We are looking at the direction of where global investments can go with more of a focus on responsible investing and sustainability in the really long term.”

According to Jerry Ehlinger, Heitman senior managing director and head of global real estate securities, “prime” real estate assets are consistently in high demand from investor capital from across the globe due to locational advantage, prestige, attractive leases to credit tenants, stable income and stable or increasing value. But they can also be difficult to access through direct investment.

The annual real estate market rankings are compiled through a review process using about 150 published surveys and indices – all across broad economic indicators – to rank the world’s leading real estate markets.