Australian Alternatives sector shines amidst economic headwinds
Jess Freeman • 10/04/2024
Despite economic headwinds, many alternative sectors have demonstrated remarkable resilience, outperforming core sectors grappling with structural shifts.
David Curtis, Co-Head of Alternatives in Australia and New Zealand at Cushman & Wakefield, commented on this trend, stating "The rising cost of living posed economic challenges in 2023, but alternative sectors like manufactured housing estates (MHE) and senior rental assets have showcased robust operating performance due to their affordable nature.
“Additionally, essential services such as education, healthcare, and aged care assets have maintained medium to long-term investment outlooks, despite short-term pressures on operating margins."
The surge in investor appetite for living sectors continued unabated in 2023, both locally and globally. Low supply in the broader residential market further bolstered the investment case for Australian living sectors.
Mr Curtis said "In 2023, we witnessed significant contributions to alternative investment volumes, noteworthy among these were instances of first-time scale investments into various Australian sectors” (as depicted in Figure 1).
He went on to say "Build-to-Rent (BTR) remains a focal point, with over 20 institutional managers now active in the Australian BTR sector. The operational performance of complete assets has exceeded expectations, driving strong investor interest.”
Navigating new fund formation posed challenges for investment managers in 2023, with the chicken-versus-egg conundrum of capital versus assets playing a central role.
"Many investment managers faced difficulties raising capital without identified and secured acquisitions. This challenge is likely to drive strategic joint ventures or consolidation among major players in 2024, as quality acquisition opportunities remain scarce across most alternative sectors" continued Mr Curtis.
David Bruce-Clarke, Co-Head of Alternatives in Australia and New Zealand at Cushman & Wakefield noted that investor interest in senior living sectors continues to gain momentum, driven by Australia's ageing population profile.
"Senior living sectors offer immediate exposure to income through operational asset acquisitions. While mature sectors like retirement living and MHE are attracting significant attention, newer sectors like BTR and co-living present development-led opportunities."
The report shows that over the past few years, a significant amount of attention has been placed on newer, development-led sectors including BTR, PBSA, Co-Living and Data Centres.
However, Mr Bruce-Clarke said the level of valuation activity shows that inquiry is rising for sectors that offer immediate access to operational stock and consequently, income. “This includes larger mature sectors such as retirement living and childcare alongside niche offerings that sit outside the core realm including emergency services, pathology, court houses and education assets.
“This momentum is expected to be driven by several factors. Firstly, although some relief is expected across the construction industry in 2024, development timeframes remain extended and feasibilities weak in many instances – a hindrance for new entrants in particular.
“Secondly, sectors such as living require substantial scale to achieve management efficiencies while sectors such as data centres require highly specialised and capital-intensive management”.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2024, the firm reported revenue of $9.4 billion across its core service lines of Services, Leasing, Capital markets, and Valuation and other. Built around the belief that Better never settles, the firm receives numerous industry and business accolades for its award-winning culture. For additional information, visit www.cushmanwakefield.com.
RECENT NEWS
Melbourne retail rebounds as Cushman & Wakefield strengthens retail leasing team
Melbourne’s retail landscape is making a strong comeback, with renewed confidence flowing through the sector as foot traffic, tenant demand, and new developments gain momentum.
Jess Freeman • 31/03/2025
Cushman & Wakefield expands Investment Sales team with seven new appointments
Global real estate firm Cushman & Wakefield has strengthened its Investment Sales team with the appointment of seven new professionals across Australia, further reinforcing its presence in key markets.
Jess Freeman • 26/03/2025
Premier Equine facility & luxury development opportunity hits the market
One of South East Queensland’s most prestigious equine properties, Grand Parkview Stud, is set to hit the market with Development Approval (DA) for a 12-lot luxury estate subdivision, paving the way for an exclusive, high-end acreage development catering to discerning buyers seeking a blend of luxury living and equestrian excellence.
Jess Freeman • 25/03/2025
Major service centre hits the market in Clayton South
A major service centre in Melbourne’s southeast has hit the market in a timely fashion following the first interest rate cut since 2020.
Jess Freeman • 14/03/2025
Cushman & Wakefield expands Queensland L&I team amid growing demand
As Queensland's Logistics and Industrial sector continues its rapid expansion, global real estate services firm Cushman & Wakefield has strengthened its team with three key appointments in its QLD Brokerage Logistics & Industrial South West division.
Jess Freeman • 11/03/2025