Introduction
Exploring the Landscape of Alternatives in 2024
Delving into the key themes that shaped the alternatives sector throughout 2023, Cushman & Wakefield’s Alternatives Outlook Report provides insightful projections for the future of alternative real estate in 2024.
Despite transactions remaining below peak levels in 2023, most alternative sectors exhibited operational resilience in an otherwise subdued investment environment. Regardless of broader macro-economic challenges, interest in Australian alternatives remains strong driven by a combination of strong demographic tailwinds and the general theme of re-allocation away from challenged core sectors.
Looking ahead to 2024, capital markets momentum is expected to increase as both investment managers and capital begin to execute on strategies as the broader macro-economic environment stabilizes.
Key Themes
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Despite ongoing economic headwinds, many alternative sectors have demonstrated strong resilience, proving less vulnerable than several core sectors that are simultaneously grappling with structural shifts. While the rising cost of living posed a raft of economic challenges in 2023, operators in sectors such as manufactured housing estates (MHE), co-living, and senior's rental services have showcased robust operating performance. Their strategic emphasis on more affordable living products allows them to effectively navigate the challenges associated with the increasing cost of living. |
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The living sectors continued to witness strong investor interest in 2023, both on a global scale and locally. Although there remains significant growth potential, most Australian living sectors are in their formative stages due to their constrained investable universe and management intensive operating models. BTR remains the focal point of the living sectors with the Australian sector gaining several new participants in 2023 including Charter Hall, Brookfield and Stockland leading to over 20+ institutional managers now active in the sector. |
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A reasonable number of investment managers ran capital raising processes for funds with alternative asset mandates in 2023. Many found it difficult to raise capital without identified and secured acquisitions. Those that did raise capital are increasingly under pressure to prove their ability to grow portfolios beyond seed assets. This chicken versus egg conundrum continues to impact new entrants to the Australian alternatives sectors and given the scarcity of quality / large scale acquisition opportunities across most alternative sectors, we believe strategic joint ventures or consolidation amongst major players is likely in 2024. |
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Inquiry into senior living continues to grow as investors seek to leverage off Australia’s aging population profile whilst simultaneously finding opportunities in sectors that match rising return expectations. In addition, investors can gain immediate exposure to income through operational asset acquisitions within more mature sectors such as retirement living and MHE, unlike newer living sectors where development led opportunities remain the primary entrance point. |
Contacts
Alternatives Capital Markets
Alternatives Valuation & Advisory
