THE PROPERTY DEVELOPMENT REVIEW
engine (ICE) vehicles, will likely continue to adapt to meet consumer demands by expanding their retail offering and reconfiguring existing sites to provide convenience-based retail centres. Colliers Investment Services Executive in Western Australia, Aidan Austen said “We have seen more confidence in where interest rates are going, and more confidence in pricing assets within the market. Service Stations continue to be in demand from investors despite the talk of “EV’s” effect on the market. Covenant quality has become more recognized and impactful on where a Service Station would sit in the current market, with Global covenants yielding premium results. Mr Austen said “Fast Food and Convenience retail has proven to be recession proof coming out of the Covid Pandemic. Yields have remained extremely strong for these types of assets – to the point that they are being purchased below the cost of debt.” Mr Cash said “Our recent experience in Western Australia, has yielded strong investor enquiry for these assets when offered via a comprehensive and robust Expression of Interest marketing campaign. This strategic approach has enhanced the potential for achieving a superior outcome in
In 2023, we observed subdued activity due to market uncertainty, rising interest rates, and other factors. However, as the market stabilises and interest rates and inflation find clearer direction, price adjustments and balanced buyer-vendor pricing are expected to invigorate the market. Notably, in Western Australia, east coast buyers and international investors recognise growth prospects and opportunities. Mr Baker said “we are definitely seeing the alternate assets of Healthcare, Childcare, Service Stations and QSR being increasingly sought after in the current market. With typically longer-term leases and stronger lease covenants buyers are looking for secure assets with minimal risk.” In terms of capital, what’s driving investor interest into alternative asset classes over & above more traditional real estate sectors. The goods and services alternative assets provide are consumed by the entire population, which guarantees long- term demand for these assets. Mr Austen said “As covid caused unprecedented time within the market, coming out the other side of the pandemic, alternative assets have been found to be recession proof. Fast Food and Service Stations were found to be unimpacted by the pandemic ultimately driving the demand up for those types of assets that weren’t impacted by a global pandemic. 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. Colliers team member in the Valuation & Advisory team in Western Australia, Sarah Krahner said “In Western Australia, the rising cost of living has pressured more people to return to work, which has subsequently increased the demand for childcare. This has resulted in higher-than-normal occupancy rates in childcare centres which has driven growth and demand as it has generated more stability and safety around the income the centres produce.” 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. Mr Baker said “The REITs were extremely active in the purchasing of these assets prior to the COVID-19 downturn. This saw the investment yields being driven tighter and tighter. As the market has shifted with the increase in interest rates and softening of investment yields, we have seen a number of these REIT’s look to sell the non-core assets in their portfolios. This is a clear opportunity for private investors with our expectation of more assets coming to market in the second half of the year.”
the sale of this asset class.” Student Accommodation
Purpose Built Student Accommodation (PBSA) is a growing asset class fast tracked after COVID-19 as borders reopened. From Semester 2 of 2022 onwards, the Perth Student Accommodation market has witnessed a significant upturn in demand and operational performance for PBSA. This trend has continued into 2023, surpassing initial expectations and resulting in occupancy and bed rates in the Perth market reaching, and/or exceeding pre- Covid levels for existing PBSA properties. Colliers Director of Investment Services, James Baker said “given the supply constraints in both the PBSA and general residential market and further anticipated growth in demand from students, the market is anticipating a strong level of rental growth over the medium term. Affordability therefore will be a growing concern for students and educational establishments.” Investors are showing greater interest in alternative real estate options beyond traditional office, retail, and industrial assets, leading to increased demand for well- located PBSA and Build to Rent (BTR) properties. Mr Baker said “Enrollment data for first-year international students in higher education in WA indicates a positive trend. Notably, the total number of students enrolled in the YTD of April 2024 surpassed the figures from 2019, with a significant increase observed among Y1 Students. International students typically constitute the primary residents in Purpose-Built Student Accommodations (PBSA).” Reflecting on the deals that you’ve transacted in the first half of the year, how are you observing market sentiment amongst commercial property investors & do you anticipate any material shift in sentiment or activity over the course of the next six months.
July / August 2024 – 87
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