The three-part Talking Property podcast series examines where CBRE’s Australian clients see the best market opportunities in 2024, including any opportunities for industry transformation.
In the second part of the 2024 property outlook series, the host speaks with ISPT’s Chris Chapple, Brookfield’s Leonie Wilkinson and Investa’s Pete Menegazzo.
There were many key talking points and topics discussed throughout the episode. Some highlights from this Talking Property podcast includes:
Chris believes that 2024 is shaping up to be a year of opportunity. In regard to the living sector, population growth, the likelihood of supply shortages over the next three to five years, and the national vacancy rate which is currently sitting at around 1% present opportunities according to Chris for above average annual rental growth.
“There’s really a perfect storm there now of the underlying demand with population growth. What we’re seeing is shortage of supply and then also where we’re seeing vacancy levels currently. So, we really see the living sector as an exciting area that we’ll look to really invest more in through 2024 and beyond.”
Chris Chapple, CEO, ISPT
Leonie says Brookfield sees really good investment opportunities in 2024 and has identified numerous secular themes that apply across all sub-sectors of real estate. These include changing demographics globally, the ‘new normal’, and how people are using real estate after a period of enormous disruption and deglobalisation. Brookfield’s overall focus areas include the living sector, logistics and office.
“What we’re seeing globally is that real estate fundamentals are in quite good shape all around the world, particularly for high quality assets. But on the other hand, what we’re seeing is capital markets that are quite disrupted. And so, for us that equals very good investment opportunities, and we think that 2024 is going to be a good vintage for us in terms of the specific sectors that we’re looking at in the real estate industry. Here in Asia Pacific and in Australia, we’re seeing some of the disruption but not quite as severe as other parts of the world. So that gives us very good opportunities to enter a time when there’s less capital coming in and less certainty around investment returns.”
Leonie Wilkinson, Senior Vice President, Brookfield
While Brookfield thinks that Build to Rent is a good place for an institutional investor to get exposure into growing rental income streams, their feeling is that this space is quite crowded now in Australia.
“We’re not overcommitting into that particular sub-sector of living, but we are going to be active across other sub-sectors of living and you’ll see us investing in places like seniors housing and student accommodation.”
Leonie Wilkinson, Senior Vice President, Brookfield
Peter sees that the Australian real estate market has been a tale of different directional headwinds over the last few years, some sectors like living have experienced mostly tailwinds but other sectors such as office have experienced significant headwinds.
In 2024, Investa expects to see a further evolution in those underlying conditions led by interest rates peaking and inflation continuing to moderate, and believe that this will open some compelling opportunities in different sectors, including the living sector (namely Build to Rent and co-living), and office.
“The living theme is an attractive theme for investors right now, right around the world, and with investors really focused on strong and growing underlying cash flows given the higher interest rate environment. The fundamentals of low vacancy, low supply and strong population growth are really supporting a positive outlook in that regard. There are really some headwinds as well, which I will acknowledge, such as the cost of construction and funding, but being disciplined on underwriting and getting early builder coverage on building costs and ensuring we’ve got plenty of contingency in the underwriting are ways we’re mitigating those risks.”
Pete Meneazzo, CEO, Investa
Pete sees that the maturation of the market, investor interest and an increased flow of investment opportunities all bode well for the living sector outlook, with Investa particularly interested in co-living.
“We’ve been doing work on that sub-sector for about 18 months and what we’re finding is it’s very difficult to find compelling Build to Rent opportunities, particularly in Sydney. And what we’re finding is the different planning regimes that the co-living sector operate under are really helping drive returns to an acceptable level for investors.”
Pete Meneazzo, CEO, Investa
