Cross border funds as a driver of commercial property market performance: a case of Melbourne, Australia

Over the last decade, there has been increased cross border real estate investments in the Australian direct commercial (office) property market. As a result, several media publications have suggested that cross border investment was driving property values, however, no empirical evidence exist to support this argument. The purpose of this study is to evaluate the role of cross border real estate funds/investments on direct commercial property market performance (total returns). Using an established econometric technique; Autoregressive Distributed Lag Model, traditionally established long-term determinants of Melbourne commercial property market drivers were determined as real GDP, stock of office space, vacancy rate and net absorption rate. A newly emerging factor; cross border investments was determined to have an impact on the performance of Melbourne office property market albeit some surprises. The study provides current relevant information on the drivers of Melbourne office property market performance with new dynamics. The results would aid property investors, developers and other key stakeholders in property investment decision making. Similarly, the Foreign Investment Review Board of Australia (a public agency) can use the results in policy formulation. The study contributes to the literature on cross border investments in Australian commercial property market which has barely been examined