International investors CBRE Global Investors and Universal-Investment have paid about $150 million for the South Wharf Tower, in Melbourne which was sold by the open-ended real estate fund Deka-ImmobilienGlobal managed by Deka Immobilien.
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CBE Global Investors manages about $70 billion of direct property globally and will manage the new property on behalf of Bayerische Versorgungskammer (BVK), one of Germany's largest institutional investors. South Wharf Tower represents CBRE Global Investors first direct acquisition in Australia.
This comes as overseas cash continues to look for a home in Australia.
According to Colliers International, a survey of global property investors has found Melbourne and Sydney ranked second and third respectively as targets for offshore capital in the year ahead.
Colliers International's 2016 Global Investor Outlook found that, despite being relatively small property markets compared to London and New York, Melbourne and Sydney are the second and third targets for offshore capital in 2016. London took out top spot.
John Marasco, Colliers International managing director of capital markets and investment services, said this was consistent with global capital flows data for 2015, which currently ranks Sydney third behind London and Manhattan in terms of investment volumes from offshore investors.
"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," he said.
"Demand for Sydney assets will continue on the back of significant infrastructure investment in New South Wales, with metropolitan markets being a major focus for investors in 2016. In Melbourne, demand is still very much being driven by strong activity in the education sector."
The highly-antcipated sale of South Wharf Tower comes amid more deals being tipped for the coming year. In Sydney, agents are working with a number of suitors for 420 George Street, while 183-185 Clarence Street, Sydney was sold by Alfasi to a Southeast Asian group for more than $20 million.
It is a new entrant into the Australian property market according to the agent on the deal, Andrew Langsford, Vice President, JLL Hotels & Hospitality Group.
The centrally located 1030-square-metre site, a former Ausgrid substation, offers dual street frontage to Clarence and Kent Streets along with strategic proximity to Sydney's largest urban renewal projects, Barangaroo and the new International Convention Centre Sydney.
Andrew Glass, managing director, CBRE Global Investors Australia, said South Wharf Tower is a modern 21,000-square-metre office building and part of a larger mixed-use project along the Yarra River.
The building is fully occupied by a mix of tenants across a diverse range of industries, including ANL, Lendlease and tobacco giant Phillip Morris. South Wharf Tower was built in 2009 and Deka Immobilien secured the property for its real estate fund in 2010.
"We are pleased to have secured South Wharf Tower for BVK as part of their Global investment mandate," Mr Glass said.
"Client demand to invest in Australia continues to be strong, which is consistent with our research view that domestic real estate markets will outperform on a global, risk-adjusted basis."
Alexander Tannenbaum, managing director at Universal-Investment in charge of the Real Estate division, said German institutional investors are still internationalising their real estate allocations.
"The Asian Pacific area is next to U.S. currently one of the preferred real estate markets abroad," Mr Tannenbaum said.
"At present, about 40 per cent of the roughly €4.5 billion in real estate assets administered through Universal-Investment's platform are invested outside of Germany," Mr Tannenbaum said.
