THE PROPERTY DEVELOPMENT REVIEW
Looking ahead, transaction activity is expected to increase across the alternatives sector, potentially driven by a global interest rate easing. Alternative sectors, particularly within the living space such as student accommodation, build-to-rent (BTR), and retirement living remain positioned for strong investment activity, supported by a structural under supply, steady end-user demand, and in some cases, strong government backing. Living: Resilience in the Face of Change The living sector continues to demonstrate resilience, particularly within the Purpose-Built Student Accommodation (PBSA) sector which remains a priority for many investors, even despite short-term proposed migration cuts. Confidence in the PBSA sector remains bolstered by record-high occupancy rates, largely driven by the broader residential rental market’s tight conditions. The Manufactured Housing Estates (MHE) or land lease communities continues to see a significant amount of activity, with new partnerships and equity infusions signaling a strong growth trajectory. In the retirement sector, significant activity persists, with large platforms entering the market and an uptick in smaller-scale transactions are boosting capital markets. Cushman & Wakefield is forecasting living sector yields to remain broadly stable. Social Infrastructure: Growing Investment and Strategic Focus Investment in social infrastructure remains robust Several Specialist Disability Accommodation (SDA) fund managers actively raising capital and building on the successes of their initial investments. These opportunities continue to attract both wholesale and institutional investors due to compelling risk-adjusted returns. The Housing Australia Future Fund (HAFF), with its AUD $10 billion initial funding, has garnered strong interest from community housing providers and fund managers, aiming to expand social and affordable housing, particularly for Indigenous communities, women, children, and veterans. In the healthcare sector, an increase in transaction activity is predicted to be driven by asset recycling programs and narrowing of bid-ask spread across the sector. Childcare centre demand remains elevated, driven by a concentrated efforts from both the government and the industry to support female workforce participation. This focus on childcare ensures it remains a priority, contributing to stable yields in the sector going forward. Major Transactions and Market Trends in Agriculture, Self-Storage, and Renewable Energy In a significant move for the leased agriculture sector, the Centuria Agriculture Fund has expanded its portfolio with the acquisition of Katunga Fresh, a 21-hectare glasshouse facility in Victoria, valued at AUD $90 million. This acquisition stands out as one of the largest leased agriculture transactions for the quarter, highlighting the sector’s growth and increasing availability of high-value sites. Meanwhile, the self-storage sector continues to show resilience with strong rental growth across major Australian and New Zealand markets. Although occupancy rates have slightly decreased from their peak, settling between 85%-90%, revenue has maintained consistent year-on-year growth since late 2020, indicating early signs of revenue stabilisation. Investor appetite remains strong, as evident by favorable investment metrics in 2024 transactions thus far. On the renewable energy front, government support remains a key driver, highlighted by the Australian Renewable Energy Agency’s (ARENA) AUD $1 billion investment in domestic solar photovoltaic (PV) manufacturing through the Solar Sunshot program. This initiative aims to bolster local production across the PV supply chain, complementing significant government investments in renewable hydrogen and its derivatives. As we move into the second half of 2024, Cushman & Wakefield anticipates increased transacion activity. With global interest rates expected to ease and a narrowing of pricing gaps, investors are focusing on high-demand areas within the living sector. This momentum, combined with structural factors and strong government support, is likely to drive an active period in the alternatives sector.
August / September 2024 – 17
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