PODCAST: Why international capital could return to Melbourne

The prospect of a softening Australian Dollar throughout 2025 is likely to draw overseas capital back Down Under after a glut of new development and relentless interest rises over the past two years saw key markets put ‘on the bench’ by some investors.

Melbourne, which has been the most impacted by the culmination of factors, which also includes a slow return to the office after Covid lockdowns, is set to benefit the most, especially the hotel and office sectors.

“(In 2024) we thought we would be back into the recovery but that didn’t happen at all,” said Peter Harper, head of hotel investment sales – Australasia, JLL, speaking on the Perspectives podcast. “I think most investors took stock of where the world was at, where the markets were at and where debt was going to go. But now, with the strengthening of the U.S. Dollar and what it means for the Australian Dollar, there’s going to be a positive impact on hotel trading over the course of 2025 with a flow-on effect for investment.”

Asked about trends likely to unfold over the year, Annabel McFarlane, head of strategic research – Australia, JLL, also speaking on the podcast, highlighted an inevitable shake up from the new Australian Sustainability Reporting Standards as well as an update to the International Valuation Standards, which mandates climate-related reporting and for ESG factors to be considered in valuations.

A new national standard to measure and reduce embodied carbon in buildings, introduced by NABERS, will refocus the minds of landlords on refurbishment rather than redevelopment considering the embodied carbon in an existing building, McFarlane added.

“While we've got high vacancy, that's going to really make a lot of groups think, ‘I'm going to have to do something’,” she said.

James Jorgensen, head of logistics and industrial leasing – Victoria, JLL, predicted many companies would be moving their national distribution centres from Sydney to Melbourne because of the city’s “relative affordability”.

Jorgensen cited in the podcast a correction in Victoria’s industrial leasing market in 2024, which saw leasing volumes fall to 30 percent of its three-year average. Despite this it maintained its position as one of Australia’s strongest markets.

“We’re still in pretty good shape,” he said.

Listen to the Perspectives podcast here.