THE PROPERTY DEVELOPMENT REVIEW
It is also important to note that the Australian hotel market by comparison to the other core markets is relatively illiquid. Long- term annual transaction volumes for the hotel sector sit around A$2.14 billion, which is much smaller than the Office (A$14.44b), Retail (A$7.51b), and Industrial (A$7.20b) sectors. Also typically in any one year, the top-10 hotel deals account for approx. 68% amount of total volumes. Accordingly, investors are presented with very few opportunities each year to enter into key markets and destinations. Throughout the pandemic, one of the key trends was the enormous investment into regional leisure assets - is this still the case or has the balance returned to capital city / metropolitan assets. The balance has definitely returned to more historic investment trends, with a larger proportion of deal activity occurring in capital city / metropolitan assets.
Just this year, over 85% of total transaction volumes have been within CBD and metro markets.
This is not to say that regional deals are not occurring. The activity is definitely still there, just not at the same investment levels seen in previous years coming out of the pandemic, as well as the deals typically being mid-markets and smaller in size.
By nature of how much activity we saw over recent years, regional activity had to moderate and stablise.
Looking ahead to the immediate future, broadly speaking, what are some of the assets you & the team are anticipating bringing to market this year (general location, asset subtype, value etc). We’re certainly anticipating an considerable uplift in transaction activity over the course of 2025, and are currently working on several assets across the country that will formally come to market in the first quarter. These assets are quite varied in terms of market, type, and price-level, and align with our general view and advice to clients on what will attract the strongest investor appetite in the current environment. Unlike what we saw this year with several assets coming to market and unsurprisingly failing to meet sell-side expectations. In closing, over the longer term, what makes Australia’s leisure markets so resilient & where are the opportunities for investors over the years ahead. It all comes back to strong fundamentals in what makes Australia’s markets so resilient, whether it be the diversity of our room-night demand, strength of economy, strong population growth, almost perpetual increases in domestic and international arrivals, exceptional supportive infrastructure, and an ever-growing calendar of major events. Despite tough economic environments, we saw that major events such as the Taylor Swift concerts, Formula 1 Grand Prix, Australian Open, and Vivid Sydney to name a few, continue to attract record crowds and result in strong peaks in hotel demand. Whilst, Sydney and Melbourne continue to hold gateway city status, South-East Queensland is now a market that’s firmly entrenched on many investors wish lists owing to its population growth, considerable public and private investment and development, and the other positive benefits that will arise in the lead up to the 2032 Olympic Games and beyond.
October / November 2024 – 55
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