Low growth market making investors look for newer sectors, placemaking: CBRE
The low-growth environment will likely make investors focus on placemaking and present them with the potential to invest in new sectors and locations, according to CBRE’s outlook on the trends shaping the Australian property market.
This was the over-arching theme of the commercial real estate firm’s annual Melbourne Market Outlook presentation recently, which also highlighted the strong performance of Australia’s south-east property markets – in particular, Melbourne and Sydney.
Both cities have stood out from an APAC perspective given their outlook for low office vacancy rates and office rental growth averaging 7 percent over the next three years, said CBRE’s head of Research, Australia, Stephen McNabb.
However, in an environment of relatively limited overall growth, McNabb said investors needed to seek out opportunities to optimise their portfolios, taking into account factors such as the current focus on space efficiency and workplace flexibility.
CBRE’s Asia Pacific head of Research, Dr Henry Chin, said this was driving a heightened interest in trends such as placemaking, as owners sought to unlock property value through asset repositioning.
“Landlords should be striving to create a community of tenants instead of simply providing office space,” Dr Chin said.
“You have to create communities to keep tenants in your building and that’s why we talk about placemaking.”
McNabb referenced CBRE’s recent Millennials survey, which highlighted the heightened focus of millennials on areas such as greenspace and wellness in the workplace.
“Decision makers need to start looking more at employee data to drive their decisions as customer expectations are changing,” McNabb said.
The presentation also highlighted a growing trend for investors to seek out opportunities in newer sectors and markets.
“From a cyclical perspective, Australia’s south east markets are the stand out in terms of forecast income growth,” McNabb said.
“However, we expect to see more domestic investors looking offshore and at opportunities to alternative assets such as health & aged care, infrastructure and even institutional investment in residential,” McNabb said.
