1. Strong Start to the Year
A Happy New year to you all. The real estate market has witnessed a robust beginning with active buyers throughout the holiday season and January. Notably, Costi Cohen achieved an impressive $30,000,000 in deals between Christmas and New Year’s, setting a positive tone.
2. Market Dynamics and Investor Strategies
Economists predict a year-end drop in interest rates, likely leading to price increases. Investors are seizing current opportunities before rates decline. Stock remains tight, and buyers are proactive, not waiting for formal campaigns. Acquisition off-market remains prevalent, offering high-yield opportunities.
3. 2024 Outlook: Build to Rent and Industrial Sectors
Anticipate a significant surge in the build-to-rent sector in 2024. Industrial properties continue to outperform, characterized by tight incentives, low vacancy, and rental growth. The rise of e-commerce and AI-led platforms sustains demand for data centres, particularly in APAC.
4. Investment Activity Across the Asia Pacific
We anticipate a steady increase in investment activity across the Asia Pacific in 2024. The commercial property market in is expected to maintain a strong global position. Industrial and logistics emerge as the preferred asset class, overtaking office space.
Statistics:
- The APAC region accounted for 23% of total global investment volumes YTD 2023, exceeding the long-term average of 18%.
- APAC sales volumes are only down by 30% compared to 2022 levels, whereas global investment activity is down by almost 50%.
5. Sector-wise Insights
a. Office:
Premium office spaces and investor interest will continue to outshine other sectors. Strategies such as retrofitting lower-grade assets for higher ESG credentials are gaining traction, especially in major markets like Sydney, Melbourne, and Brisbane.
b. Industrial:
The industrial market remains resilient, with predictions of continued rental growth. The growth of e-commerce and interest in AI-led platforms drive the demand for data centre spaces, particularly in Australia. 50% of Industrial supply for 2024 is already pre-committed, ensuring continued rental growth. This month, Costi Cohen purchased an industrial strata unit below-market value in a quality complex in Brookvale, which perfectly suited our owner occupier client looking to expand their children’s footwear operation.
c. Retail:
Demand for Australian retail centres is expected to surpass supply, leading to positive rental growth. The focus on experience-based retail as well as an increase in immigration and travel are key drivers for sales and footfall in the Asia Pacific region. We have seen a steady increase in investor and owner occupier clients alike, looking to secure retail opportunities at below-market prices before the end of the year.
d. BTR Australia:
The emerging build-to-rent sector attracts capital due to declining affordability of housing and population growth. Changes in tax settings further reinforce the appeal of investing in Australia’s build-to-rent sector. We have seen a significant increase in clients looking for build-to-rent opportunities, having just purchased a 1,877 sqm site with mixed-use zoning and 6:1 FSR for our repeat, co-living developer client.
e. Hotels and Hospitality:
Investors are drawn to the hospitality sector’s resurgence connected to increased consumer spending and regional tourism. Luxury resorts are performing well, and capital values for the broader Australian hotel market remain competitive.
6. Market Resilience
Despite global challenges, the APAC region has shown resilience, accounting for 23% of total global investment volumes YTD 2023. APAC’s commercial property market is expected to maintain a strong global position, contributing to growing global investment activity.
As we move into 2024, the real estate market in the Australia remains dynamic, with promising opportunities across various sectors. Investors are encouraged to stay informed and capitalize on the evolving trends.
Best regards,
Tas Costi