The Australian alternatives sector has emerged as a beacon of resilience and growth amidst ongoing economic challenges, according to new insights revealed in the latest Australian Alternatives Outlook 2024 report by Cushman & Wakefield, a global leader in real estate services.
Despite economic headwinds, many alternative sectors have demonstrated remarkable resilience, outperforming core sectors grappling with structural shifts.
“The rising cost of living posed economic challenges in 2023, but alternative sectors like manufactured housing estates (MHE) and senior rental assets have showcased robust operating performance due to their affordable nature.
“Additionally, essential services such as education, healthcare, and aged care assets have maintained medium to long-term investment outlooks, despite short-term pressures on operating margins.”
David Curtis, Co-Head of Alternatives in Australia and New Zealand, Cushman & Wakefield
The surge in investor appetite for living sectors continued unabated in 2023, both locally and globally. Low supply in the broader residential market further bolstered the investment case for Australian living sectors.
“In 2023, we witnessed significant contributions to alternative investment volumes, noteworthy among these were instances of first-time scale investments into various Australian sectors. Build to Rent remains a focal point, with over 20 institutional managers now active in the Australian Build to Rent sector. The operational performance of complete assets has exceeded expectations, driving strong investor interest.”
David Curtis, Co-Head of Alternatives in Australia and New Zealand, Cushman & Wakefield
Navigating new fund formation posed challenges for investment managers in 2023, with the chicken-versus-egg conundrum of capital versus assets playing a central role.
“Many investment managers faced difficulties raising capital without identified and secured acquisitions. This challenge is likely to drive strategic joint ventures or consolidation among major players in 2024, as quality acquisition opportunities remain scarce across most alternative sectors.”
David Curtis, Co-Head of Alternatives in Australia and New Zealand, Cushman & Wakefield
David Bruce-Clarke, Co-Head of Alternatives noted that investor interest in senior living sectors continues to gain momentum, driven by Australia’s ageing population profile.
“Senior living sectors offer immediate exposure to income through operational asset acquisitions. While mature sectors like retirement living and MHE are attracting significant attention, newer sectors like Build to Rent and co-living present development-led opportunities.”
David Bruce-Clarke, Co-Head of Alternatives in Australia and New Zealand, Cushman & Wakefield
The report also shows that over the past few years, a significant amount of attention has been placed on newer, development-led sectors including Build to Rent, PBSA, Co-Living and Data Centres.
However, David Bruce-Clarke said the level of valuation activity shows that inquiry is rising for sectors that offer immediate access to operational stock and consequently, income.
“This includes larger mature sectors such as retirement living and childcare alongside niche offerings that sit outside the core realm including emergency services, pathology, court houses and education assets.
“This momentum is expected to be driven by several factors. Firstly, although some relief is expected across the construction industry in 2024, development timeframes remain extended and feasibilities weak in many instances – a hindrance for new entrants in particular.
“Secondly, sectors such as living require substantial scale to achieve management efficiencies while sectors such as Data Centres require highly specialised and capital-intensive management.”
David Bruce-Clarke, Co-Head of Alternatives in Australia and New Zealand, Cushman & Wakefield
