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2019 AUSTRALIA PROPERTY OUTLOOK ______
Just under $35 billion worth of Australian office, industrial and retail property (> $5m) changed hands in 2018, which is a $1 billion increase on sales activity over the previous calendar year. Both domestic and offshore investors continue to be attracted to the strong long term fundamentals of the Australian property market.Emerging asset classes will be a key focus for investors in 2019, and in the residential space, there will be continued activity in those sub-markets that will see medium to long term uplift from the many significant infrastructure projects underway around the country.A total of $123 billion worth of transport infrastructure projects are currently under construction around Australia – more than double the amount that was under construction only 3 years ago. This spend is in response to the strong population growth, and will further boost property markets for years to come.
OFFICE
____
The key themes for Capital Markets in 2019 will be a pivot of the major institutions, including our local super funds, to alternative asset classes. While certain markets, such as Sydney and Melbourne CBD and Metro office markets, still offer investors the opportunity for good income growth over the next two years, the yield compression cycle is seen to be nearing its trough. To meet total return hurdles, we are already seeing the super funds look to the healthcare and retirement living and student accommodation sectors. The emerging Build-to-Rent sector continues to be watched closely by these groups.
Mergers and Acquisitions (M & A) was a theme in 2018 and we believe will continue into 2019. With a lack of opportunity for our major global investors to source large scale individual assets, well funded groups are going after their smaller counterparts, in order to achieve scale and deploy capital.
Overall, both local and offshore investors continue to be very positive about the outlook for Australian commercial property. While population growth will be a key theme during the upcoming NSW and Federal elections, the medium to long term outlook remains positive, and Australia will continue to attract skilled migrants that help to contribute to office demand. The continued infrastructure boom, and the positive endorsement this received from the electorate in the recent Victorian election, will also improve the outlook for Australian commercial property.
John Marasco
Managing Director, Capital Markets &
Investment Services
Vacancy will continue to tighten across Australia’s major office markets. Occupiers will compete for limited space and drive vacancy rates even lower in the years ahead. Forecasts for office vacancy in key markets such as Sydney, Melbourne and Brisbane have tightened on the back of positive net absorption and continued strong demand. Vacancy will continue its downward trend in the Sydney CBD until 2021 with significant commitment to new supply that is coming on line in 2018 – 2020. In Melbourne, rental growth will continue to accelerate into 2019.
Contiguous office space* across eastern seaboard CBDs will be in short supply, with limited options expected to drive rents further upwards in the years ahead. This will create a need for tenants to consider their office requirement sooner than they may have intended. In the current climate of low vacancy, particularly in Sydney and Melbourne, contiguous office space can be a competitive advantage for owners. Savvy tenants will come to the market earlier, so they don’t miss out on future opportunities, with even large space occupiers being prepared to relocate well ahead of lease expiry to secure contiguous floors.
Demand for large office space above 3,000sqm will continue to rise in major markets. Tight vacancy rates in Melbourne CBD and Sydney CBD, in particular, are impacting on how many leasing deals are being concluded. Within the next few years, up until the end of 2021, CBD markets in Sydney, Melbourne and Brisbane have limited supply. This will have an impact on rents and motivate tenants to consider looking for space outside CBD locations.
*Contiguous office space: More than 2,000sqm over two or more adjoining floors.
Simon Hunt
Managing Director, Office Leasing
Corporate occupiers are expected to increase their focus on forecasting just how much space they require now and into the future. This will involve in-depth discussions around core versus flexible space requirements, with co-working groups continuing to expand their footprint in major markets and an increase in freelance workers across Australia. We expect to see a growing number of corporates taking on freelancers for certain roles.
Health and wellbeing will become an even greater focus for both landlords and occupiers alike. We expect to see a bigger push for corporate occupiers to offer real and tangible benefits to their workforce, including mindfulness facilities.
The fight to attract and retain the best talent is well underway. New generations are more selective about who they work for, what brands or organisations they represent and where they work. Location and amenity are crucial, as is the need to provide more than just a ‘workplace’ – this is where inclusions like health and wellbeing facilities and initiatives will also come into play.
James Armstrong
Head of Workplace Management Services,
Occupier Services
INDUSTRIAL
____
BUILD UP NOT OUT
With operational costs continuing to rise, developers and operators in the industrial space are calling for more modern warehouses with a greater reliance on automation and use of robotics. As a result, we will continue to see multi-storey warehousing emerging across city fringe locations in major markets across Australia, particularly the markets currently experiencing land shortages such as Sydney and Melbourne.
Rising land values are putting further restriction on supply growth, which is feeding back to pent-up demand and rising effective rents. The high land costs are forcing landlords to focus on maximising floor space ratios (FSR) and floor efficiency. As a result, multi-storey industrial estates are expected to be more prevalent in the market within the next few years.
CONVERTING WASTE TO ENERGY
Australia continues to become more sustainably focused, and we expect to see more investment in technology and new infrastructure to deal with growing levels of waste particularly on industrial sites. For example, the Queensland State Government is soon to implement a ‘Waste disposal levy’ to incentivise recycling and recovery and create new jobs. This new strategy will provide the resource recovery and waste sector with the policy certainty required to invest in new technologies and infrastructure to deal with growing levels of waste and convert it to energy rather than turning it to landfill. German-based waste company Remondis, who run more than 50 waste-to energy power plants in Eastern Europe, also plan on building a power plant in Ipswich. The proposed plant will convert between 300,000 and 500,000 tonnes of waste per year to generate up to 50 megawatts of baseload electricity for Queensland households and businesses. We expect 2019 to bring an increased focus on this kind of initiative.
NEW WAREHOUSE SPEC BUILDS
Demand continues to outstrip supply and vacancy declines, and as a result developers are becoming more confident with speculative developments which are achieving strong leasing results prior to completion. In Sydney in particular, we expect industrial warehouses to continue being built without pre-commitments from tenants. According to Colliers International research, all speculative developments in Sydney over the past year had been leased prior to completion, reflecting the strong demand for this type of product.
SMALLER INDUSTRIAL FACILITIES NEAR KEY METROPOLITAN AREAS
As online retailing booms, more and more retailers are looking at smaller industrial facilities – for example 5,000-10,000sqm of space – near densely populated areas to better cater for demanding delivery windows, as opposed to single, or fewer, large distribution centres in major capital cities.
Rather than the typically-phrased last mile delivery, it is the last half hour deliver that needs to be the focus for businesses within the warehouse and distribution industry sector can reach CBD zone (and deliver goods) within a 30-minute zone.
Areas that have been popular with last mile delivery to date include Alexandria, Botany and Mascot.
SHORTAGE OF INDUSTRIAL LAND
As industrial land shortages continue to be felt across all major capital cities, the potential for the market to move in favour of landlords is increasing. We anticipate incentives to fall and/or rents to increase for tenants, highlighting the importance for occupiers and tenants to place a stronger emphasis, and longer lead in time, on their property strategy and decisions.
Malcom Tyson
Managing Director, Industrial
RETAIL
____
Strong investor demand in the Australian retail property market continued throughout 2018, however, investment volumes were constrained by the lack of quality stock available on the market. Despite this, high quality centres underpinned by strong catchments and trading performance continued to attract strong yields. During Calendar Year 2018, we recorded $8.25billion in retail property transactions (over $10million), which is 12% lower than the all-time high recorded in the prior year.
2018 was a big year for neighbourhood shopping centres with 46 sales recorded, making this the most active retail category. Affordability and exposure towards the strong performing non-discretionary sector were the primary drawcards that evoked strong interest from investors into the sector. Investment activity for neighbourhood centres was further boosted by SCA Property Group’s acquisition of a $573 million portfolio from Vicinity Centres. Out of the 10 assets purchased by SCA Property Group, there were seven neighbourhood centres with a combined value of $362.1 million. In total value terms, sub-regional centres were the most active asset class during CY18. More than $2.08 billion worth of sub-regional assets were sold during the year. This represents more than a quarter of the overall retail investment market and a significant increase of 118% compared to the year prior. There were 20 deals with an average transaction value of $104 million. Local institutional investors were the most active buyers of Sub-Regional assets.
The regional shopping centre market also experienced a strong year of activity with over $1.93 billion worth of assets changing hands over CY18. Colliers International transacted more than half (52%) of the total sales value of regional shopping centres this year including the record portfolio sale of a 50% stake in Pacific Werribee and Pacific Epping. The solid trading results of retail assets in Australia reaffirm investor confidence in the Australian retail market. Despite challenges around the world, we are strongly convinced that brick-and-mortar retailing is here to stay and will continue to transform and adapt to the paradigm shift in consumer behaviours.
There will be renewed interest in large format retail as a standalone asset class, which will ensure growth via LFR retailers and the sustainability of the category since its defensive nature from online retailing.
Michael Bate
Head of Retail
RESIDENTIAL
____
In 2019, we will see an increased number of developers looking to buy development sites that already have some form of existing income on them. There will be a rationalisation of the development community – we will see some developers go quiet or hold, and some will focus on their residual stock. There will be an expectation on the appointed project marketing team to ensure there is a higher level of engagement with buyers and building the customer relationship.
Buyers will gravitate towards quality locations with low supply and developments that have an experienced and reputable developer with a proven track record, who has shown they can deliver. Buyers will turn their attention to smaller boutique developments in the highly sought-after locations, with developments with high quality finish, features and inclusions.
In the current climate there is a big focus on infrastructure. With the imminent completion/opening of several different projects such as the Norwest rail link, George Street Light Rail and several major roads due for completion, we expect things will start to quiet down. The flow-on affect will be that we will see the market start to breathe again, as this will inject new life and room for new/more infrastructure to commence the cycle again.
Peter Chittenden
Managing Director, Residential
HOTELS
____
Deal flow will increase in 2019 as owners respond to changing market conditions, particularly in markets with significant new supply. Development debt will become harder to secure and marginal projects will be shelved. Offshore banks and non-traditional lenders will take a greater role in the Australian accommodation market.
We expect to see a continued broadening of the capital base, with increased activity by locally domiciled investment funds. Offshore capital in 2019 will be sourced from Singapore, Malaysia, Thailand, Middle East, Hong Kong, India and United Kingdom but with growing interest from global and U.S. funds.
Hotel openings are expected to peak in 2019 with the opening of more than 6,500 new rooms in the ten major accommodation markets. Melbourne, Perth and Sydney will see the lion’s sharing of openings, placing downward pressure on trading. If they have not yet done so, existing owners will need to consider expediting the renovation cycle to compete with new supply.
Australia’s appeal as a premium destination will continue to grow with growing visitor dispersal as travellers seek out genuine paddock to plate food and wine travel experiences. This is resulting in significant investment in vineyards, turning them from functional spaces into some of the most outstanding dining and accommodation destinations across the country.
Gus Moors
Head of Hotels, Australia
HEALTHCARE &
RETIREMENT LIVING
____
Investment into the Australian Healthcare sector is expected to grow by circa $4billion across the continuum in 2019, via a mix of both onshore and offshore capital. The Royal Commission into Residential Aged will continue to result in sector volatility, driving consolidation as a primary by-product.
The retirement living sector will continue to adjust both accommodation and service models to accord for changes in consumer behaviour and value assessment, while the LLC sub-sector will continue to increase its market share as a lower cost option to retirement living. Medical centres are starting to move away from standalone placement to being integrated within precincts.
The hospital network will have to adapt its operating models to recapture the circa 20% of privately insured people who are opting to use the public system and as a result, causing the private hospitals to rethink investment decisions. Consequently, the demand supply gap in the short is likely to increase and place the public system under greater pressure, whilst simultaneously reducing potential returns in the private sector.
Shalain Singh
Head of Healthcare & Retirement Living
AGRIBUSINESS
____
CURRENCY
Australian Agribusinesses are global exporters so a lower currency swap with USD-AUD trending below 70c in 2019, is a huge positive driver for both enterprise earnings and for inbound capital flows, we are now seen as a huge value for money proposition in Australia comparatively to the rest of the world base currencies.
REGULATORY INFLUENCES
Southern hemisphere international investors are left with limited choices due to South American macro-economic issues, South African ownership instability, and New Zealand’s foreign investment shutdown to sub 25% investment limits. These factors leave Australian assets best placed as the only option for Southern Hemisphere for an international investor to consider.
TECHNOLOGICAL ADVANCEMENT
Horticulture will continue to be attractive to institutional investment and large families as state of the art mechanisation, robotics & machine learning technology on scalable assets now becoming management competencies. Drones are increasingly being used for crop and stock monitoring with machine learning and analytics giving farmers the ability to use their information more efficiently in operational management.
SHEEP & WOOL RENAISSANCE
Watch the sheep run! Sheep & Wool enterprises in Australia continue to be 2 to 3 times more profitable than other livestock enterprises and this trend is expected to continue into 2019. A considerable proportion of Australian wool processed in China is exported to the US as textiles and apparel, therefore the ongoing trade war between China-US is a risk factor for the industry. Strong global demand for Australian sheep meat, combined with the softer Australian dollar and constrained domestic supplies out of New Zealand, have supported record export volumes and values (MLA, 2018).
VITICULTURE
Sales of wine industry assets in premium growing regions are expected to continue exceeding decade highs, due to unprecedented demand for quality assets and the resurgence of grape prices. Assets planted to the right varietal mix in premium regions continue to attract interest from a multitude of players, including existing industry participants, sophisticated high net worth individuals, corporate and institutional investors and speculators.
Rawdon Briggs
Head of Rural & Agribusiness, Agribusiness
2019 AUSTRALIA
PROPERTY OUTLOOK
_______
Just under $35 billion worth of Australian office, industrial and retail property (> $5m) changed hands in 2018, which is a $1 billion increase on sales activity over the previous calendar year. Both domestic and offshore investors continue to be attracted to the strong long term fundamentals of the Australian property market.
Emerging asset classes will be a key focus for investors in 2019, and in the residential space, there will be continued activity in those sub-markets that will see medium to long term uplift from the many significant infrastructure projects underway around the country.
A total of $123 billion worth of transport infrastructure projects are currently under construction around Australia – more than double the amount that was under construction only 3 years ago. This spend is in response to the strong population growth, and will further boost property markets for years to come.
Just under $35 billion worth of Australian office, industrial and retail property (> $5m) changed hands in 2018, which is a $1 billion increase on sales activity over the previous calendar year. Both domestic and offshore investors continue to be attracted to the strong long term fundamentals of the Australian property market.
Emerging asset classes will be a key focus for investors in 2019, and in the residential space, there will be continued activity in those sub-markets that will see medium to long term uplift from the many significant infrastructure projects underway around the country.
A total of $123 billion worth of transport infrastructure projects are currently under construction around Australia – more than double the amount that was under construction only 3 years ago. This spend is in response to the strong population growth, and will further boost property markets for years to come.
Just under $35 billion worth of Australian office, industrial and retail property (> $5m) changed hands in 2018, which is a $1 billion increase on sales activity over the previous calendar year. Both domestic and offshore investors continue to be attracted to the strong long term fundamentals of the Australian property market.
Emerging asset classes will be a key focus for investors in 2019, and in the residential space, there will be continued activity in those sub-markets that will see medium to long term uplift from the many significant infrastructure projects underway around the country.
A total of $123 billion worth of transport infrastructure projects are currently under construction around Australia – more than double the amount that was under construction only 3 years ago. This spend is in response to the strong population growth, and will further boost property markets for years to come.
2019 AUSTRALIA PROPERTY OUTLOOK
_______
Just under $35 billion worth of Australian office, industrial and retail property (> $5m) changed hands in 2018, which is a $1 billion increase on sales activity over the previous calendar year. Both domestic and offshore investors continue to be attracted to the strong long term fundamentals of the Australian property market.
Emerging asset classes will be a key focus for investors in 2019, and in the residential space, there will be continued activity in those sub-markets that will see medium to long term uplift from the many significant infrastructure projects underway around the country.
A total of $123 billion worth of transport infrastructure projects are currently under construction around Australia – more than double the amount that was under construction only 3 years ago. This spend is in response to the strong population growth, and will further boost property markets for years to come.
Just under $35 billion worth of Australian office, industrial and retail property (> $5m) changed hands in 2018, which is a $1 billion increase on sales activity over the previous calendar year. Both domestic and offshore investors continue to be attracted to the strong long term fundamentals of the Australian property market.
Emerging asset classes will be a key focus for investors in 2019, and in the residential space, there will be continued activity in those sub-markets that will see medium to long term uplift from the many significant infrastructure projects underway around the country.
A total of $123 billion worth of transport infrastructure projects are currently under construction around Australia – more than double the amount that was under construction only 3 years ago. This spend is in response to the strong population growth, and will further boost property markets for years to come.
Just under $35 billion worth of Australian office, industrial and retail property (> $5m) changed hands in 2018, which is a $1 billion increase on sales activity over the previous calendar year. Both domestic and offshore investors continue to be attracted to the strong long term fundamentals of the Australian property market.
Emerging asset classes will be a key focus for investors in 2019, and in the residential space, there will be continued activity in those sub-markets that will see medium to long term uplift from the many significant infrastructure projects underway around the country.
A total of $123 billion worth of transport infrastructure projects are currently under construction around Australia – more than double the amount that was under construction only 3 years ago. This spend is in response to the strong population growth, and will further boost property markets for years to come.
OFFICE
____
The key themes for Capital Markets in 2019 will be a pivot of the major institutions, including our local super funds, to alternative asset classes. While certain markets, such as Sydney and Melbourne CBD and Metro office markets, still offer investors the opportunity for good income growth over the next two years, the yield compression cycle is seen to be nearing its trough. To meet total return hurdles, we are already seeing the super funds look to the healthcare and retirement living and student accommodation sectors. The emerging Build-to-Rent sector continues to be watched closely by these groups.
Mergers and Acquisitions (M & A) was a theme in 2018 and we believe will continue into 2019. With a lack of opportunity for our major global investors to source large scale individual assets, well funded groups are going after their smaller counterparts, in order to achieve scale and deploy capital.
Overall, both local and offshore investors continue to be very positive about the outlook for Australian commercial property. While population growth will be a key theme during the upcoming NSW and Federal elections, the medium to long term outlook remains positive, and Australia will continue to attract skilled migrants that help to contribute to office demand. The continued infrastructure boom, and the positive endorsement this received from the electorate in the recent Victorian election, will also improve the outlook for Australian commercial property.
Vacancy will continue to tighten across Australia’s major office markets. Occupiers will compete for limited space and drive vacancy rates even lower in the years ahead. Forecasts for office vacancy in key markets such as Sydney, Melbourne and Brisbane have tightened on the back of positive net absorption and continued strong demand. Vacancy will continue its downward trend in the Sydney CBD until 2021 with significant commitment to new supply that is coming on line in 2018 – 2020. In Melbourne, rental growth will continue to accelerate into 2019.
Contiguous office space* across eastern seaboard CBDs will be in short supply, with limited options expected to drive rents further upwards in the years ahead. This will create a need for tenants to consider their office requirement sooner than they may have intended. In the current climate of low vacancy, particularly in Sydney and Melbourne, contiguous office space can be a competitive advantage for owners. Savvy tenants will come to the market earlier, so they don’t miss out on future opportunities, with even large space occupiers being prepared to relocate well ahead of lease expiry to secure contiguous floors.
Demand for large office space above 3,000sqm will continue to rise in major markets. Tight vacancy rates in Melbourne CBD and Sydney CBD, in particular, are impacting on how many leasing deals are being concluded. Within the next few years, up until the end of 2021, CBD markets in Sydney, Melbourne and Brisbane have limited supply. This will have an impact on rents and motivate tenants to consider looking for space outside CBD locations.
*Contiguous office space: More than 2,000sqm over two or more adjoining floors.
Corporate occupiers are expected to increase their focus on forecasting just how much space they require now and into the future. This will involve in-depth discussions around core versus flexible space requirements, with co-working groups continuing to expand their footprint in major markets and an increase in freelance workers across Australia. We expect to see a growing number of corporates taking on freelancers for certain roles.
Health and wellbeing will become an even greater focus for both landlords and occupiers alike. We expect to see a bigger push for corporate occupiers to offer real and tangible benefits to their workforce, including mindfulness facilities.
The fight to attract and retain the best talent is well underway. New generations are more selective about who they work for, what brands or organisations they represent and where they work. Location and amenity are crucial, as is the need to provide more than just a ‘workplace’ – this is where inclusions like health and wellbeing facilities and initiatives will also come into play.
INDUSTRIAL
____
Build up not out
With operational costs continuing to rise, developers and operators in the industrial space are calling for more modern warehouses with a greater reliance on automation and use of robotics. As a result, we will continue to see multi-storey warehousing emerging across city fringe locations in major markets across Australia, particularly the markets currently experiencing land shortages such as Sydney and Melbourne.
Rising land values are putting further restriction on supply growth, which is feeding back to pent-up demand and rising effective rents. The high land costs are forcing landlords to focus on maximising floor space ratios (FSR) and floor efficiency. As a result, multi-storey industrial estates are expected to be more prevalent in the market within the next few years.
Converting waste to energy
Australia continues to become more sustainably focused, and we expect to see more investment in technology and new infrastructure to deal with growing levels of waste particularly on industrial sites. For example, the Queensland State Government is soon to implement a ‘Waste disposal levy’ to incentivise recycling and recovery and create new jobs. This new strategy will provide the resource recovery and waste sector with the policy certainty required to invest in new technologies and infrastructure to deal with growing levels of waste and convert it to energy rather than turning it to landfill. German-based waste company Remondis, who run more than 50 waste-to energy power plants in Eastern Europe, also plan on building a power plant in Ipswich. The proposed plant will convert between 300,000 and 500,000 tonnes of waste per year to generate up to 50 megawatts of baseload electricity for Queensland households and businesses. We expect 2019 to bring an increased focus on this kind of initiative.
New warehouse spec builds
Demand continues to outstrip supply and vacancy declines, and as a result developers are becoming more confident with speculative developments which are achieving strong leasing results prior to completion. In Sydney in particular, we expect industrial warehouses to continue being built without pre-commitments from tenants. According to Colliers International research, all speculative developments in Sydney over the past year had been leased prior to completion, reflecting the strong demand for this type of product.
Smaller industrial facilities near key metropolitan areas
As online retailing booms, more and more retailers are looking at smaller industrial facilities – for example 5,000-10,000sqm of space – near densely populated areas to better cater for demanding delivery windows, as opposed to single, or fewer, large distribution centres in major capital cities.
Rather than the typically-phrased last mile delivery, it is the last half hour deliver that needs to be the focus for businesses within the warehouse and distribution industry sector can reach CBD zone (and deliver goods) within a 30-minute zone.
Areas that have been popular with last mile delivery to date include Alexandria, Botany and Mascot.
Shortage of industrial land
As industrial land shortages continue to be felt across all major capital cities, the potential for the market to move in favour of landlords is increasing. We anticipate incentives to fall and/or rents to increase for tenants, highlighting the importance for occupiers and tenants to place a stronger emphasis, and longer lead in time, on their property strategy and decisions.
RETAIL
____
Strong investor demand in the Australian retail property market continued throughout 2018, however, investment volumes were constrained by the lack of quality stock available on the market. Despite this, high quality centres underpinned by strong catchments and trading performance continued to attract strong yields. During Calendar Year 2018, we recorded $8.25billion in retail property transactions (over $10million), which is 12% lower than the all-time high recorded in the prior year.
2018 was a big year for neighbourhood shopping centres with 46 sales recorded, making this the most active retail category. Affordability and exposure towards the strong performing non-discretionary sector were the primary drawcards that evoked strong interest from investors into the sector.
Investment activity for neighbourhood centres was further boosted by SCA Property Group’s acquisition of a $573 million portfolio from Vicinity Centres. Out of the 10 assets purchased by SCA Property Group, there were seven neighbourhood centres with a combined value of $362.1 million. In total value terms, sub-regional centres were the most active asset class during CY18. More than $2.08 billion worth of sub-regional assets were sold during the year. This represents more than a quarter of the overall retail investment market and a significant increase of 118% compared to the year prior. There were 20 deals with an average transaction value of $104 million. Local institutional investors were the most active buyers of Sub-Regional assets.
The regional shopping centre market also experienced a strong year of activity with over $1.93billion worth of assets changing hands over CY18. Colliers International transacted more than half (52%) of the total sales value of regional shopping centres this year including the record portfolio sale of a 50% stake in Pacific Werribee and Pacific Epping. The solid trading results of retail assets in Australia reaffirm investor confidence in the Australian retail market. Despite challenges around the world, we are strongly convinced that brick-and-mortar retailing is here to stay and will continue to transform and adapt to the paradigm shift in consumer behaviours.
There will be renewed interest in large format retail as a standalone asset class, which will ensure growth via LFR retailers and the sustainability of the category since its defensive nature from online retailing.
RESIDENTIAL
____
In 2019, we will see an increased number of developers looking to buy development sites that already have some form of existing income on them. There will be a rationalisation of the development community – we will see some developers go quiet or hold, and some will focus on their residual stock. There will be an expectation on the appointed project marketing team to ensure there is a higher level of engagement with buyers and building the customer relationship.
Buyers will gravitate towards quality locations with low supply and developments that have an experienced and reputable developer with a proven track record, who has shown they can deliver. Buyers will turn their attention to smaller boutique developments in the highly sought-after locations, with developments with high quality finish, features and inclusions.
In the current climate there is a big focus on infrastructure. With the imminent completion/opening of several different projects such as the Norwest rail link, George Street Light Rail and several major roads due for completion, we expect things will start to quiet down. The flow-on affect will be that we will see the market start to breathe again, as this will inject new life and room for new/more infrastructure to commence the cycle again.
HOTELS
____
Deal flow will increase in 2019 as owners respond to changing market conditions, particularly in markets with significant new supply. Development debt will become harder to secure and marginal projects will be shelved. Offshore banks and non-traditional lenders will take a greater role in the Australian accommodation market.
We expect to see a continued broadening of the capital base, with increased activity by locally domiciled investment funds. Offshore capital in 2019 will be sourced from Singapore, Malaysia, Thailand, Middle East, Hong Kong, India and United Kingdom but with growing interest from global and U.S. funds.
Hotel openings are expected to peak in 2019 with the opening of more than 6,500 new rooms in the ten major accommodation markets. Melbourne, Perth and Sydney will see the lion’s sharing of openings, placing downward pressure on trading. If they have not yet done so, existing owners will need to consider expediting the renovation cycle to compete with new supply.
Australia’s appeal as a premium destination will continue to grow with growing visitor dispersal as travellers seek out genuine paddock to plate food and wine travel experiences. This is resulting in significant investment in vineyards, turning them from functional spaces into some of the most outstanding dining and accommodation destinations across the country.
HEALTHCARE & RETIREMENT LIVING
____
Investment into the Australian Healthcare sector is expected to grow by circa $4billion across the continuum in 2019, via a mix of both onshore and offshore capital. The Royal Commission into Residential Aged will continue to result in sector volatility, driving consolidation as a primary by-product.
The retirement living sector will continue to adjust both accommodation and service models to accord for changes in consumer behaviour and value assessment, while the LLC sub-sector will continue to increase its market share as a lower cost option to retirement living. Medical centres are starting to move away from standalone placement to being integrated within precincts.
The hospital network will have to adapt its operating models to recapture the circa 20% of privately insured people who are opting to use the public system and as a result, causing the private hospitals to rethink investment decisions. Consequently, the demand supply gap in the short is likely to increase and place the public system under greater pressure, whilst simultaneously reducing potential returns in the private sector.
AGRIBUSINESS
____
Currency
Australian Agribusinesses are global exporters so a lower currency swap with USD-AUD trending below 70c in 2019, is a huge positive driver for both enterprise earnings and for inbound capital flows, we are now seen as a huge value for money proposition in Australia comparatively to the rest of the world base currencies.
Regulatory Influences
Southern hemisphere international investors are left with limited choices due to South American macro-economic issues, South African ownership instability, and New Zealand’s foreign investment shutdown to sub 25% investment limits. These factors leave Australian assets best placed as the only option for Southern Hemisphere for an international investor to consider.
Technological Advancements
Horticulture will continue to be attractive to institutional investment and large families as state of the art mechanisation, robotics & machine learning technology on scalable assets now becoming management competencies. Drones are increasingly being used for crop and stock monitoring with machine learning and analytics giving farmers the ability to use their information more efficiently in operational management.
SHEEP & WOOL RENAISSANCE
Watch the sheep run! Sheep & Wool enterprises in Australia continue to be 2 to 3 times more profitable than other livestock enterprises and this trend is expected to continue into 2019. A considerable proportion of Australian wool processed in China is exported to the US as textiles and apparel, therefore the ongoing trade war between China-US is a risk factor for the industry. Strong global demand for Australian sheep meat, combined with the softer Australian dollar and constrained domestic supplies out of New Zealand, have supported record export volumes and values (MLA, 2018).
VITICULTURE
Sales of wine industry assets in premium growing regions are expected to continue exceeding decade highs, due to unprecedented demand for quality assets and the resurgence of grape prices. Assets planted to the right varietal mix in premium regions continue to attract interest from a multitude of players, including existing industry participants, sophisticated high net worth individuals, corporate and institutional investors and speculators.
OFFICE
____
The key themes for Capital Markets in 2019 will be a pivot of the major institutions, including our local super funds, to alternative asset classes. While certain markets, such as Sydney and Melbourne CBD and Metro office markets, still offer investors the opportunity for good income growth over the next two years, the yield compression cycle is seen to be nearing its trough. To meet total return hurdles, we are already seeing the super funds look to the healthcare and retirement living and student accommodation sectors. The emerging Build-to-Rent sector continues to be watched closely by these groups.
Mergers and Acquisitions (M & A) was a theme in 2018 and we believe will continue into 2019. With a lack of opportunity for our major global investors to source large scale individual assets, well funded groups are going after their smaller counterparts, in order to achieve scale and deploy capital.
Overall, both local and offshore investors continue to be very positive about the outlook for Australian commercial property. While population growth will be a key theme during the upcoming NSW and Federal elections, the medium to long term outlook remains positive, and Australia will continue to attract skilled migrants that help to contribute to office demand. The continued infrastructure boom, and the positive endorsement this received from the electorate in the recent Victorian election, will also improve the outlook for Australian commercial property.
Vacancy will continue to tighten across Australia’s major office markets. Occupiers will compete for limited space and drive vacancy rates even lower in the years ahead. Forecasts for office vacancy in key markets such as Sydney, Melbourne and Brisbane have tightened on the back of positive net absorption and continued strong demand. Vacancy will continue its downward trend in the Sydney CBD until 2021 with significant commitment to new supply that is coming on line in 2018 – 2020. In Melbourne, rental growth will continue to accelerate into 2019.
Contiguous office space* across eastern seaboard CBDs will be in short supply, with limited options expected to drive rents further upwards in the years ahead. This will create a need for tenants to consider their office requirement sooner than they may have intended. In the current climate of low vacancy, particularly in Sydney and Melbourne, contiguous office space can be a competitive advantage for owners. Savvy tenants will come to the market earlier, so they don’t miss out on future opportunities, with even large space occupiers being prepared to relocate well ahead of lease expiry to secure contiguous floors.
Demand for large office space above 3,000sqm will continue to rise in major markets. Tight vacancy rates in Melbourne CBD and Sydney CBD, in particular, are impacting on how many leasing deals are being concluded. Within the next few years, up until the end of 2021, CBD markets in Sydney, Melbourne and Brisbane have limited supply. This will have an impact on rents and motivate tenants to consider looking for space outside CBD locations.
*Contiguous office space: More than 2,000sqm over two or more adjoining floors.
Corporate occupiers are expected to increase their focus on forecasting just how much space they require now and into the future. This will involve in-depth discussions around core versus flexible space requirements, with co-working groups continuing to expand their footprint in major markets and an increase in freelance workers across Australia. We expect to see a growing number of corporates taking on freelancers for certain roles.
Health and wellbeing will become an even greater focus for both landlords and occupiers alike. We expect to see a bigger push for corporate occupiers to offer real and tangible benefits to their workforce, including mindfulness facilities.
The fight to attract and retain the best talent is well underway. New generations are more selective about who they work for, what brands or organisations they represent and where they work. Location and amenity are crucial, as is the need to provide more than just a ‘workplace’ – this is where inclusions like health and wellbeing facilities and initiatives will also come into play.
INDUSTRIAL
____
Build up not out
With operational costs continuing to rise, developers and operators in the industrial space are calling for more modern warehouses with a greater reliance on automation and use of robotics. As a result, we will continue to see multi-storey warehousing emerging across city fringe locations in major markets across Australia, particularly the markets currently experiencing land shortages such as Sydney and Melbourne.
Rising land values are putting further restriction on supply growth, which is feeding back to pent-up demand and rising effective rents. The high land costs are forcing landlords to focus on maximising floor space ratios (FSR) and floor efficiency. As a result, multi-storey industrial estates are expected to be more prevalent in the market within the next few years.
Converting waste to energy
Australia continues to become more sustainably focused, and we expect to see more investment in technology and new infrastructure to deal with growing levels of waste particularly on industrial sites. For example, the Queensland State Government is soon to implement a ‘Waste disposal levy’ to incentivise recycling and recovery and create new jobs. This new strategy will provide the resource recovery and waste sector with the policy certainty required to invest in new technologies and infrastructure to deal with growing levels of waste and convert it to energy rather than turning it to landfill. German-based waste company Remondis, who run more than 50 waste-to energy power plants in Eastern Europe, also plan on building a power plant in Ipswich. The proposed plant will convert between 300,000 and 500,000 tonnes of waste per year to generate up to 50 megawatts of baseload electricity for Queensland households and businesses. We expect 2019 to bring an increased focus on this kind of initiative.
New warehouse spec builds
Demand continues to outstrip supply and vacancy declines, and as a result developers are becoming more confident with speculative developments which are achieving strong leasing results prior to completion. In Sydney in particular, we expect industrial warehouses to continue being built without pre-commitments from tenants. According to Colliers International research, all speculative developments in Sydney over the past year had been leased prior to completion, reflecting the strong demand for this type of product.
Smaller industrial facilities near key metropolitan areas
As online retailing booms, more and more retailers are looking at smaller industrial facilities – for example 5,000-10,000sqm of space – near densely populated areas to better cater for demanding delivery windows, as opposed to single, or fewer, large distribution centres in major capital cities.
Rather than the typically-phrased last mile delivery, it is the last half hour deliver that needs to be the focus for businesses within the warehouse and distribution industry sector can reach CBD zone (and deliver goods) within a 30-minute zone.
Areas that have been popular with last mile delivery to date include Alexandria, Botany and Mascot.
Shortage of industrial land
As industrial land shortages continue to be felt across all major capital cities, the potential for the market to move in favour of landlords is increasing. We anticipate incentives to fall and/or rents to increase for tenants, highlighting the importance for occupiers and tenants to place a stronger emphasis, and longer lead in time, on their property strategy and decisions.
RETAIL
____
Strong investor demand in the Australian retail property market continued throughout 2018, however, investment volumes were constrained by the lack of quality stock available on the market. Despite this, high quality centres underpinned by strong catchments and trading performance continued to attract strong yields. During Calendar Year 2018, we recorded $8.25billion in retail property transactions (over $10million), which is 12% lower than the all-time high recorded in the prior year.
2018 was a big year for neighbourhood shopping centres with 46 sales recorded, making this the most active retail category. Affordability and exposure towards the strong performing non-discretionary sector were the primary drawcards that evoked strong interest from investors into the sector.
Investment activity for neighbourhood centres was further boosted by SCA Property Group’s acquisition of a $573million portfolio from Vicinity Centres. Out of the 10 assets purchased by SCA Property Group, there were seven neighbourhood centres with a combined value of $362.1million. In total value terms, sub-regional centres were the most active asset class during CY18. More than $2.08billion worth of sub-regional assets were sold during the year. This represents more than a quarter of the overall retail investment market and a significant increase of 118% compared to the year prior. There were 20 deals with an average transaction value of $104million. Local institutional investors were the most active buyers of Sub-Regional assets.
The regional shopping centre market also experienced a strong year of activity with over $1.93billion worth of assets changing hands over CY18. Colliers International transacted more than half (52%) of the total sales value of regional shopping centres this year including the record portfolio sale of a 50% stake in Pacific Werribee and Pacific Epping. The solid trading results of retail assets in Australia reaffirm investor confidence in the Australian retail market. Despite challenges around the world, we are strongly convinced that brick-and-mortar retailing is here to stay and will continue to transform and adapt to the paradigm shift in consumer behaviours.
There will be renewed interest in large format retail as a standalone asset class, which will ensure growth via LFR retailers and the sustainability of the category since its defensive nature from online retailing.
2019 AUSTRALIA PROPERTY OUTLOOK
_______
Just under $35 billion worth of Australian office, industrial and retail property (> $5m) changed hands in 2018, which is a $1 billion increase on sales activity over the previous calendar year. Both domestic and offshore investors continue to be attracted to the strong long term fundamentals of the Australian property market.
Emerging asset classes will be a key focus for investors in 2019, and in the residential space, there will be continued activity in those sub-markets that will see medium to long term uplift from the many significant infrastructure projects underway around the country.
A total of $123 billion worth of transport infrastructure projects are currently under construction around Australia – more than double the amount that was under construction only 3 years ago. This spend is in response to the strong population growth, and will further boost property markets for years to come.
Just under $35 billion worth of Australian office, industrial and retail property (> $5m) changed hands in 2018, which is a $1 billion increase on sales activity over the previous calendar year. Both domestic and offshore investors continue to be attracted to the strong long term fundamentals of the Australian property market.
Emerging asset classes will be a key focus for investors in 2019, and in the residential space, there will be continued activity in those sub-markets that will see medium to long term uplift from the many significant infrastructure projects underway around the country.
A total of $123 billion worth of transport infrastructure projects are currently under construction around Australia – more than double the amount that was under construction only 3 years ago. This spend is in response to the strong population growth, and will further boost property markets for years to come.
Just under $35 billion worth of Australian office, industrial and retail property (> $5m) changed hands in 2018, which is a $1 billion increase on sales activity over the previous calendar year. Both domestic and offshore investors continue to be attracted to the strong long term fundamentals of the Australian property market.
Emerging asset classes will be a key focus for investors in 2019, and in the residential space, there will be continued activity in those sub-markets that will see medium to long term uplift from the many significant infrastructure projects underway around the country.
A total of $123 billion worth of transport infrastructure projects are currently under construction around Australia – more than double the amount that was under construction only 3 years ago. This spend is in response to the strong population growth, and will further boost property markets for years to come.
OFFICE
____
The key themes for Capital Markets in 2019 will be a pivot of the major institutions, including our local super funds, to alternative asset classes. While certain markets, such as Sydney and Melbourne CBD and Metro office markets, still offer investors the opportunity for good income growth over the next two years, the yield compression cycle is seen to be nearing its trough. To meet total return hurdles, we are already seeing the super funds look to the healthcare and retirement living and student accommodation sectors. The emerging Build-to-Rent sector continues to be watched closely by these groups.
Mergers and Acquisitions (M & A) was a theme in 2018 and we believe will continue into 2019. With a lack of opportunity for our major global investors to source large scale individual assets, well funded groups are going after their smaller counterparts, in order to achieve scale and deploy capital.
Overall, both local and offshore investors continue to be very positive about the outlook for Australian commercial property. While population growth will be a key theme during the upcoming NSW and Federal elections, the medium to long term outlook remains positive, and Australia will continue to attract skilled migrants that help to contribute to office demand. The continued infrastructure boom, and the positive endorsement this received from the electorate in the recent Victorian election, will also improve the outlook for Australian commercial property.
Vacancy will continue to tighten across Australia’s major office markets. Occupiers will compete for limited space and drive vacancy rates even lower in the years ahead. Forecasts for office vacancy in key markets such as Sydney, Melbourne and Brisbane have tightened on the back of positive net absorption and continued strong demand. Vacancy will continue its downward trend in the Sydney CBD until 2021 with significant commitment to new supply that is coming on line in 2018 – 2020. In Melbourne, rental growth will continue to accelerate into 2019.
Contiguous office space* across eastern seaboard CBDs will be in short supply, with limited options expected to drive rents further upwards in the years ahead. This will create a need for tenants to consider their office requirement sooner than they may have intended. In the current climate of low vacancy, particularly in Sydney and Melbourne, contiguous office space can be a competitive advantage for owners. Savvy tenants will come to the market earlier, so they don’t miss out on future opportunities, with even large space occupiers being prepared to relocate well ahead of lease expiry to secure contiguous floors.
Demand for large office space above 3,000sqm will continue to rise in major markets. Tight vacancy rates in Melbourne CBD and Sydney CBD, in particular, are impacting on how many leasing deals are being concluded. Within the next few years, up until the end of 2021, CBD markets in Sydney, Melbourne and Brisbane have limited supply. This will have an impact on rents and motivate tenants to consider looking for space outside CBD locations.
*Contiguous office space: More than 2,000sqm over two or more adjoining floors.
Corporate occupiers are expected to increase their focus on forecasting just how much space they require now and into the future. This will involve in-depth discussions around core versus flexible space requirements, with co-working groups continuing to expand their footprint in major markets and an increase in freelance workers across Australia. We expect to see a growing number of corporates taking on freelancers for certain roles.
Health and wellbeing will become an even greater focus for both landlords and occupiers alike. We expect to see a bigger push for corporate occupiers to offer real and tangible benefits to their workforce, including mindfulness facilities.
The fight to attract and retain the best talent is well underway. New generations are more selective about who they work for, what brands or organisations they represent and where they work. Location and amenity are crucial, as is the need to provide more than just a ‘workplace’ – this is where inclusions like health and wellbeing facilities and initiatives will also come into play.
INDUSTRIAL
____
Build up not out
With operational costs continuing to rise, developers and operators in the industrial space are calling for more modern warehouses with a greater reliance on automation and use of robotics. As a result, we will continue to see multi-storey warehousing emerging across city fringe locations in major markets across Australia, particularly the markets currently experiencing land shortages such as Sydney and Melbourne.
Rising land values are putting further restriction on supply growth, which is feeding back to pent-up demand and rising effective rents. The high land costs are forcing landlords to focus on maximising floor space ratios (FSR) and floor efficiency. As a result, multi-storey industrial estates are expected to be more prevalent in the market within the next few years.
Converting waste to energy
Australia continues to become more sustainably focused, and we expect to see more investment in technology and new infrastructure to deal with growing levels of waste particularly on industrial sites. For example, the Queensland State Government is soon to implement a ‘Waste disposal levy’ to incentivise recycling and recovery and create new jobs. This new strategy will provide the resource recovery and waste sector with the policy certainty required to invest in new technologies and infrastructure to deal with growing levels of waste and convert it to energy rather than turning it to landfill. German-based waste company Remondis, who run more than 50 waste-to energy power plants in Eastern Europe, also plan on building a power plant in Ipswich. The proposed plant will convert between 300,000 and 500,000 tonnes of waste per year to generate up to 50 megawatts of baseload electricity for Queensland households and businesses. We expect 2019 to bring an increased focus on this kind of initiative.
New warehouse spec builds
Demand continues to outstrip supply and vacancy declines, and as a result developers are becoming more confident with speculative developments which are achieving strong leasing results prior to completion. In Sydney in particular, we expect industrial warehouses to continue being built without pre-commitments from tenants. According to Colliers International research, all speculative developments in Sydney over the past year had been leased prior to completion, reflecting the strong demand for this type of product.
Smaller industrial facilities near key metropolitan areas
As online retailing booms, more and more retailers are looking at smaller industrial facilities – for example 5,000-10,000sqm of space – near densely populated areas to better cater for demanding delivery windows, as opposed to single, or fewer, large distribution centres in major capital cities.
Rather than the typically-phrased last mile delivery, it is the last half hour deliver that needs to be the focus for businesses within the warehouse and distribution industry sector can reach CBD zone (and deliver goods) within a 30-minute zone.
Areas that have been popular with last mile delivery to date include Alexandria, Botany and Mascot.
Shortage of industrial land
As industrial land shortages continue to be felt across all major capital cities, the potential for the market to move in favour of landlords is increasing. We anticipate incentives to fall and/or rents to increase for tenants, highlighting the importance for occupiers and tenants to place a stronger emphasis, and longer lead in time, on their property strategy and decisions.
RETAIL
____
Strong investor demand in the Australian retail property market continued throughout 2018, however, investment volumes were constrained by the lack of quality stock available on the market. Despite this, high quality centres underpinned by strong catchments and trading performance continued to attract strong yields. During Calendar Year 2018, we recorded $8.25billion in retail property transactions (over $10million), which is 12% lower than the all-time high recorded in the prior year.
2018 was a big year for neighbourhood shopping centres with 46 sales recorded, making this the most active retail category. Affordability and exposure towards the strong performing non-discretionary sector were the primary drawcards that evoked strong interest from investors into the sector.
Investment activity for neighbourhood centres was further boosted by SCA Property Group’s acquisition of a $573 million portfolio from Vicinity Centres. Out of the 10 assets purchased by SCA Property Group, there were seven neighbourhood centres with a combined value of $362.1 million. In total value terms, sub-regional centres were the most active asset class during CY18. More than $2.08 billion worth of sub-regional assets were sold during the year. This represents more than a quarter of the overall retail investment market and a significant increase of 118% compared to the year prior. There were 20 deals with an average transaction value of $104 million. Local institutional investors were the most active buyers of Sub-Regional assets.
The regional shopping centre market also experienced a strong year of activity with over $1.93billion worth of assets changing hands over CY18. Colliers International transacted more than half (52%) of the total sales value of regional shopping centres this year including the record portfolio sale of a 50% stake in Pacific Werribee and Pacific Epping. The solid trading results of retail assets in Australia reaffirm investor confidence in the Australian retail market. Despite challenges around the world, we are strongly convinced that brick-and-mortar retailing is here to stay and will continue to transform and adapt to the paradigm shift in consumer behaviours.
There will be renewed interest in large format retail as a standalone asset class, which will ensure growth via LFR retailers and the sustainability of the category since its defensive nature from online retailing.
RESIDENTIAL
____
In 2019, we will see an increased number of developers looking to buy development sites that already have some form of existing income on them. There will be a rationalisation of the development community – we will see some developers go quiet or hold, and some will focus on their residual stock. There will be an expectation on the appointed project marketing team to ensure there is a higher level of engagement with buyers and building the customer relationship.
Buyers will gravitate towards quality locations with low supply and developments that have an experienced and reputable developer with a proven track record, who has shown they can deliver. Buyers will turn their attention to smaller boutique developments in the highly sought-after locations, with developments with high quality finish, features and inclusions.
In the current climate there is a big focus on infrastructure. With the imminent completion/opening of several different projects such as the Norwest rail link, George Street Light Rail and several major roads due for completion, we expect things will start to quiet down. The flow-on affect will be that we will see the market start to breathe again, as this will inject new life and room for new/more infrastructure to commence the cycle again.
RESIDENTIAL
____
In 2019, we will see an increased number of developers looking to buy development sites that already have some form of existing income on them. There will be a rationalisation of the development community – we will see some developers go quiet or hold, and some will focus on their residual stock. There will be an expectation on the appointed project marketing team to ensure there is a higher level of engagement with buyers and building the customer relationship.
Buyers will gravitate towards quality locations with low supply and developments that have an experienced and reputable developer with a proven track record, who has shown they can deliver. Buyers will turn their attention to smaller boutique developments in the highly sought-after locations, with developments with high quality finish, features and inclusions.
In the current climate there is a big focus on infrastructure. With the imminent completion/opening of several different projects such as the Norwest rail link, George Street Light Rail and several major roads due for completion, we expect things will start to quiet down. The flow-on affect will be that we will see the market start to breathe again, as this will inject new life and room for new/more infrastructure to commence the cycle again.
HOTELS
____
Deal flow will increase in 2019 as owners respond to changing market conditions, particularly in markets with significant new supply. Development debt will become harder to secure and marginal projects will be shelved. Offshore banks and non-traditional lenders will take a greater role in the Australian accommodation market.
We expect to see a continued broadening of the capital base, with increased activity by locally domiciled investment funds. Offshore capital in 2019 will be sourced from Singapore, Malaysia, Thailand, Middle East, Hong Kong, India and United Kingdom but with growing interest from global and U.S. funds.
Hotel openings are expected to peak in 2019 with the opening of more than 6,500 new rooms in the ten major accommodation markets. Melbourne, Perth and Sydney will see the lion’s sharing of openings, placing downward pressure on trading. If they have not yet done so, existing owners will need to consider expediting the renovation cycle to compete with new supply.
Australia’s appeal as a premium destination will continue to grow with growing visitor dispersal as travellers seek out genuine paddock to plate food and wine travel experiences. This is resulting in significant investment in vineyards, turning them from functional spaces into some of the most outstanding dining and accommodation destinations across the country.
HOTELS
____
Deal flow will increase in 2019 as owners respond to changing market conditions, particularly in markets with significant new supply. Development debt will become harder to secure and marginal projects will be shelved. Offshore banks and non-traditional lenders will take a greater role in the Australian accommodation market.
We expect to see a continued broadening of the capital base, with increased activity by locally domiciled investment funds. Offshore capital in 2019 will be sourced from Singapore, Malaysia, Thailand, Middle East, Hong Kong, India and United Kingdom but with growing interest from global and U.S. funds.
Hotel openings are expected to peak in 2019 with the opening of more than 6,500 new rooms in the ten major accommodation markets. Melbourne, Perth and Sydney will see the lion’s sharing of openings, placing downward pressure on trading. If they have not yet done so, existing owners will need to consider expediting the renovation cycle to compete with new supply.
Australia’s appeal as a premium destination will continue to grow with growing visitor dispersal as travellers seek out genuine paddock to plate food and wine travel experiences. This is resulting in significant investment in vineyards, turning them from functional spaces into some of the most outstanding dining and accommodation destinations across the country.
HEALTHCARE & RETIREMENT LIVING
____
Investment into the Australian Healthcare sector is expected to grow by circa $4billion across the continuum in 2019, via a mix of both onshore and offshore capital. The Royal Commission into Residential Aged will continue to result in sector volatility, driving consolidation as a primary by-product.
The retirement living sector will continue to adjust both accommodation and service models to accord for changes in consumer behaviour and value assessment, while the LLC sub-sector will continue to increase its market share as a lower cost option to retirement living. Medical centres are starting to move away from standalone placement to being integrated within precincts.
The hospital network will have to adapt its operating models to recapture the circa 20% of privately insured people who are opting to use the public system and as a result, causing the private hospitals to rethink investment decisions. Consequently, the demand supply gap in the short is likely to increase and place the public system under greater pressure, whilst simultaneously reducing potential returns in the private sector.
HEALTHCARE & RETIREMENT LIVING
____
Investment into the Australian Healthcare sector is expected to grow by circa $4billion across the continuum in 2019, via a mix of both onshore and offshore capital. The Royal Commission into Residential Aged will continue to result in sector volatility, driving consolidation as a primary by-product.
The retirement living sector will continue to adjust both accommodation and service models to accord for changes in consumer behaviour and value assessment, while the LLC sub-sector will continue to increase its market share as a lower cost option to retirement living. Medical centres are starting to move away from standalone placement to being integrated within precincts.
The hospital network will have to adapt its operating models to recapture the circa 20% of privately insured people who are opting to use the public system and as a result, causing the private hospitals to rethink investment decisions. Consequently, the demand supply gap in the short is likely to increase and place the public system under greater pressure, whilst simultaneously reducing potential returns in the private sector.
AGRIBUSINESS
____
Currency
Australian Agribusinesses are global exporters so a lower currency swap with USD-AUD trending below 70c in 2019, is a huge positive driver for both enterprise earnings and for inbound capital flows, we are now seen as a huge value for money proposition in Australia comparatively to the rest of the world base currencies.
Regulatory Influences
Southern hemisphere international investors are left with limited choices due to South American macro-economic issues, South African ownership instability, and New Zealand’s foreign investment shutdown to sub 25% investment limits. These factors leave Australian assets best placed as the only option for Southern Hemisphere for an international investor to consider.
Technological Advancements
Horticulture will continue to be attractive to institutional investment and large families as state of the art mechanisation, robotics & machine learning technology on scalable assets now becoming management competencies. Drones are increasingly being used for crop and stock monitoring with machine learning and analytics giving farmers the ability to use their information more efficiently in operational management.
SHEEP & WOOL RENAISSANCE
Watch the sheep run! Sheep & Wool enterprises in Australia continue to be 2 to 3 times more profitable than other livestock enterprises and this trend is expected to continue into 2019. A considerable proportion of Australian wool processed in China is exported to the US as textiles and apparel, therefore the ongoing trade war between China-US is a risk factor for the industry. Strong global demand for Australian sheep meat, combined with the softer Australian dollar and constrained domestic supplies out of New Zealand, have supported record export volumes and values (MLA, 2018).
VITICULTURE
Sales of wine industry assets in premium growing regions are expected to continue exceeding decade highs, due to unprecedented demand for quality assets and the resurgence of grape prices. Assets planted to the right varietal mix in premium regions continue to attract interest from a multitude of players, including existing industry participants, sophisticated high net worth individuals, corporate and institutional investors and speculators.
RURAL & AGRIBUSINESS
____
Currency
Australian Agribusinesses are global exporters so a lower currency swap with USD-AUD trending below 70c in 2019, is a huge positive driver for both enterprise earnings and for inbound capital flows, we are now seen as a huge value for money proposition in Australia comparatively to the rest of the world base currencies.
Regulatory Influences
Southern hemisphere international investors are left with limited choices due to South American macro-economic issues, South African ownership instability, and New Zealand’s foreign investment shutdown to sub 25% investment limits. These factors leave Australian assets best placed as the only option for Southern Hemisphere for an international investor to consider.
Technological Advancements
Horticulture will continue to be attractive to institutional investment and large families as state of the art mechanisation, robotics & machine learning technology on scalable assets now becoming management competencies. Drones are increasingly being used for crop and stock monitoring with machine learning and analytics giving farmers the ability to use their information more efficiently in operational management.
SHEEP & WOOL RENAISSANCE
Watch the sheep run! Sheep & Wool enterprises in Australia continue to be 2 to 3 times more profitable than other livestock enterprises and this trend is expected to continue into 2019. A considerable proportion of Australian wool processed in China is exported to the US as textiles and apparel, therefore the ongoing trade war between China-US is a risk factor for the industry. Strong global demand for Australian sheep meat, combined with the softer Australian dollar and constrained domestic supplies out of New Zealand, have supported record export volumes and values (MLA, 2018).
VITICULTURE
Sales of wine industry assets in premium growing regions are expected to continue exceeding decade highs, due to unprecedented demand for quality assets and the resurgence of grape prices. Assets planted to the right varietal mix in premium regions continue to attract interest from a multitude of players, including existing industry participants, sophisticated high net worth individuals, corporate and institutional investors and speculators.
Looking for more information?
For the latest news from Colliers International, visit:
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Or visit us on LinkedIn:
Colliers International
Looking for more information?
For the latest news from Colliers International, visit:
Australia – colliers.com.au
NZ - colliers.co.nz
Follow us on Twitter:
Australia – @ColliersIntAust
NZ – @ColliersIntNZ
Or visit us on LinkedIn:
Australia or New Zealand.