Aussie commercial real estate is expected to remain a hot commodity for offshore investors in 2021, with JLL pointing to a high number of global investors looking to boost their presence in Australia, lured by the promise of economic growth, among other factors.
Over the next 12 months, Australia and New Zealand are set to remain attractive real estate investment destinations for offshore capital sources, JLL has said, with investors lured by strong GDP growth, liveability attributes, transparent real estate markets and low volatility of returns.
According to the agency’s Australia and New Zealand investment market themes for 2021 report, 50 per cent of investors surveyed by JLL are planning to increase their exposure in Australia.
“The Latin phrase annus horribilis best describes 2020. The policy response to mitigate the downside risk of the economic crisis stemming from the pandemic was unprecedented in Australia and New Zealand. As a result, Australia and New Zealand are now well placed for a sustained economic recovery in 2021,” said JLL’s head of research for Australia, Andrew Ballantyne.
Mr Ballantyne explained that while the COVID pandemic brought the commercial property market to a standstill in the March to July period, as large parts of Australia were in lockdown, several transactions signalled a bounceback and strong demand in 2021.
One such transaction was the sale of the ALDI portfolio for $648 million to Charter Hall / Allianz in June 2020, highlighting the extent of investor demand for modern, long lease industrial and logistics assets underpinned by strong covenants.
But 2020 also birthed an interest in real estate alternatives, with increased investor interest seen in childcare, healthcare and data centres.
“The resilience of most real estate alternatives sub-sectors was highlighted by high rent collection rates throughout COVID-19, and it has expanded the pool of investors seeking exposure to those sub-sectors,” said JLL.
According to the agency, there are also some sub-sectors which display counter-cyclical characteristics.
“The propensity to buy a residential dwelling reduces in an economic downturn, and part of the population gravitates towards rental accommodation supporting the underlying demand for build-to-rent properties.”
JLL explained that the lowly correlated nature of real estate alternatives to economic conditions makes them less correlated to the broader market than the office and retail sectors.
“The resilience of most of these sub-sectors through COVID-19 has strengthened the investment thesis, and we expect to see a more diverse range of capital sources explore established assets and development opportunities in 2021.”