THE PROPERTY DEVELOPMENT REVIEW
have been reassessing their day-to-day lives, in particular, their capital allocation, and how they live, work, and interact with the built environment. This systematic change in our utilisation of key infrastructure assets requires future planning as we adapt to the changing landscape. The next phase of the sector’s growth will involve integrating these assets into existing premises or developing new, modern structures. A notable example is the aged care and retirement living sector, which is entering a strong growth phase due to Australia’s aging population. Early adopters of integrated and vertical assets will have the advantage of accessing opportunities in city fringe and inner suburban areas that may not be available to other providers. Although only a few providers have currently pursued vertical asset development, it is widely acknowledged that this approach will become increasingly important and widespread in the industry as it strives to meet the growing demand. By 2041, it is projected that 18.9% of the Australian population will be aged 65 and over, further emphasizing the necessity for innovation in the sector. Clearly, substantial demographic shifts are occurring throughout Australia including an ageing population, shifts in work patterns, greater requirements for cloud computing & demand for different types of rental accommodation - what’s your sense as to how these shifts (and others) are stimulating growth. The evolving dynamics, particularly the aging population and the combination of population growth and housing shortage are driving a heightened focus on how we live and interact with social infrastructure. As our cities expand, the strain on existing infrastructure assets intensifies, necessitating increased living density as a means of unlocking and future- proofing our urban centres. To ensure that we can sustain the quality of life that has made Australia an attractive destination, investments in repurposing, expanding, and redeveloping existing infrastructure are imperative. This shifting landscape is compelling operators and developers to think creatively when seeking new opportunities or enhancing their services. A prime example is the collaboration between developers and operators to establish new services in well-established yet undersupplied locations across Victoria. By embracing such innovative partnerships, stakeholders can address existing gaps in the market and meet the evolving needs of the population. Institutional property groups have generated a significant amount of activity within the alternative real estate sector to-date, where do you anticipate the opportunities exist for private investors to begin building their exposure / portfolios to alternatives.
establishing crucial alternative portfolios and infrastructure. However, there is currently a window of opportunity within the market for private capital to invest in secure key assets. The prevailing high interest rate environment and the cost of debt have restricted the level of activity from institutional capital, creating an opening for private investors. In fact, we have already witnessed several noteworthy healthcare assets trading to private-led capital in 2024. In the current climate, these investors can offer capital-ready bids on more appealing commercial terms, taking advantage of the market dynamics. Looking ahead to the second half of 2024 and early 2025, capital-ready investors who are prepared to take action will continue to have a competitive advantage in the market. The market presents an ideal opportunity for these investors to secure high-quality, established assets. By capitalising on favourable market conditions, they can position themselves strategically and potentially secure high-quality assets they may be typically priced out of. Thanks for sharing your perspectives - in closing, are there any other major investment trends or market themes that you’re analysing within an alternative real estate context that are pertinent for commercial property investors. Alternative investments are poised to gain further traction in both private and institutional portfolios due to their strong fundamentals, resistance to economic cycles, and the deep commitment of operators to their fit-outs. As the market enters a transitional phase, investors will closely monitor key economic indicators such as Reserve Bank of Australia (RBA) figures and Consumer Price Index (CPI) data, seeking positive economic signs while aiming to capitalise on a more favourable interest rate environment. The robust demographic trends within the alternative asset sector will result in increased exposure and heightened investor appetite for segments such as aged care, retirement living, and Specialist Disability Accommodation (SDA). These sectors offer substantial growth opportunities over the next five years. Consequently, yields are expected to sharpen as traditional investors gain greater exposure to these sectors. Developer activity will also surge as demand rises. Meanwhile, established sectors like healthcare and child care will continue to serve as flagship assets for traditional investors, experiencing regular transactional activity. A notable step in these sectors will involve enhanced collaboration between developers and operators to create state-of-the-art facilities purposefully designed and built for the operators’ specific needs. This strategic approach will further elevate the quality and standards of the facilities, accommodating the evolving demands of the market.
Institutional capital has played a significant role in
July / August 2024 – 45
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