From student accommodation to healthcare, logistics to data centres, what’s the next big thing in property? We asked leaders heading to Hamilton Island in September to spill the beans. Where would they put their money?
Louise Mason
CEO, Commercial Property, Stockland
“I’m backing logistics. While it looks expensive at the moment, the sector is supported by structural trends like ecommerce, automation and robotics – both domestically and globally. And it has the ability to generate recurring income over the short-medium term.
“Importantly for community creation, logistics facilities create jobs outside CBD hubs, and more broadly they provide the opportunity to restock the development pipeline for the future with changing uses in the longer term.”
Deborah Coakley
Executive General Manager – Funds Management, Dexus
“The rise of online commerce shows how big global trends are shaping returns across the real estate spectrum. Alternative property sectors are a lever for investors to position their portfolios to benefit from fundamental changes which are transforming the world. Investors who can navigate these megatrends are certain to outperform.
“Healthcare property is the alternative investment sector that is uniquely aligned with an ageing population. Nineteenth century French philosopher, Auguste Comte, was on the money when he coined the phrase ‘demography is destiny’. With Australians aged over 65 forecast to grow by around four million over the next 30 years, healthcare services will be in strong demand. This demand growth is the ‘demographic destiny’ for the healthcare property industry.
“But demand is only part of the story. Healthcare property is non-discretionary so provides investors with some protection from economic storms. Lease terms of as much as 30 or more years on triple-net leases deliver cashflow certainty rarely matched by other property classes.
“These are some of the reasons why Dexus has established a healthcare property capability and launched the Healthcare Wholesale Property Fund.”
Udhay Mathialagan, Senior Vice President, Investments & Infrastructure, Brookfield
“Data usage is growing at exponential rates. It’s one of the fastest growing commodities in the world with consumers, businesses and governments creating and consuming data more and more every day. We expect this rapid growth to persist due to greater smartphone penetration, social media, video and other cloud-based applications. With the advent of 5G networks, new devices, higher definition videos and artificial intelligence, we are seeing interesting opportunities in data transportation, storage and security. As a result, location-based infrastructure, such as data centres, is the centrepiece of the changing infrastructure landscape.
“Given the evolution and innovation taking place, data centres today are quite different to those from three to five years ago. To meet the demand, we need to combine different capabilities – such as real estate, construction, financing and understanding of technology. And for those who can bring all this together, there are significant investment opportunities.”
Carmel Hourigan
Global Head of Real Estate, AMP Capital
“The low inflation and low interest rate environment looks like it is here to stay for a while. Disruption and volatility have increased and globally we continue to see investors search for yield in an increasingly tight market.
“It is this volatility, however, that brings the opportunity. Options for our clients are diversifying by geography and across the capital stack. Investors are seeking options further up the risk curve and looking at alternatives outside traditional core asset classes.
“Our client base is broad and we are always looking at bespoke opportunities. We continue to like the office and logistics market with strong fundamentals driving returns, although the availability of stock is limiting. Retail is being disrupted at this stage and there is a possibility that negative sentiment overshoots here and provides opportunity.”
Sean McMahon
Chief Investment Officer, Charter Hall
“Australia’s logistics real estate sector has been the ‘quiet achiever’, delivering double-digit returns positioning it in the top quartile of growth globally and equally importantly with low volatility over the past few decades. This relative outperformance, on a risk-adjusted basis, has already attracted a broad base of global and local investors into Australia’s logistics sector. It has long been considered the defensive investment class given the inherently long lease characteristics and access to high-quality covenants. We’ve seen the growth in e-commerce and supply chain disruption have profoundly positive impacts on logistics markets overseas. And given Australia relative infancy in e-commerce growth, the broad-based tailwinds have yet to fully unfold across the domestic market.
“Historically, the Australian logistics sector has never had more favourable property fundamentals, with vacancy rates at very low levels and core markets materially undersupplied. Looking forward, underlying occupier demand continues to rise as retailers adapt to the ongoing changes in e-commerce and projected strong population growth. The lack of readily available serviced and zoned industrial land is also limiting the supply response. This supply imbalance will also have positive impacts on income and capital growth going forward.
“There is also a chronic lack of investment-grade logistics stock in Australia to satisfy the rapid growth of investor demand. This is partly due to Australia having a high institutional ownership base which remains focused on logistics asset ownership and creation; naturally limiting ‘captrans’ and speculative activity. This has limited the growth of physical stock, which has failed to keep up with rising investor appetites. This phenomenon is expected to continue with global institutional investors underweight in logistics. The deep capital demand will likely place further pressure on domestic asset pricing.
“These global structural tailwinds coupled with the favourable local market dynamics should deliver sustained outperformance in Australia’s industrial and logistics real estate sector.”
Tickets for Australia’s number one property conference, The Property Congress, are selling fast. Join our industry’s most respected leaders and rising stars, as well as business and political luminaries from around the world on Hamilton Island this September. Book your ticket today.