Industrial and alternative assets top picks for commercial investment

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There are a range of opportunities in commercial real estate, despite the effects of the pandemic, according to Ray White chief economist Nerida Conisbee and White & Partners managing partner George Ajaka. 

Yesterday more than 380 people joined Ray White Commercial’s webinar to hear about the latest trends, challenges and opportunities across Australia and New Zealand. 

While some commercial sectors may be struggling, including office and retail, many are seeing a huge increase in demand, the biggest being the industrial sector.

Ms Conisbee (pictured above) said high vacancy rates hadn’t deterred investors from the office market but ongoing lockdowns could prove challenging for the sector. 

“Office vacancy rate is at a 25 year high at 11.9 per cent, but it has surprised me the vacancy rate hasn’t creeped up a lot more as a lot of employees continue to work from home. 

“In the six months to July we actually saw positive net absorption everywhere except Melbourne. 

“However, ongoing lockdowns are very bad news for the office sector workers / business continue to get more used to hybrid working. 

“The future of the office remains highly uncertain, but investors are shrugging off any concerns.” 

Ms Conisbee said industrial assets were currently the preferred commercial property type. 

“Total returns continue to push upwards, driven by capital growth,” she said. 

“At this stage, popularity is set to continue, driven by continued shift to online shopping.” 

White & Partners currently has north of $1.1 billion of funds invested across various projects, with 56 per cent of the portfolio in the industrial sector. 

Mr Ajaka said two or three years ago the White & Partners portfolio looked a lot different, with larger holdings across the hospitality sector and mixed use developments, which currently only hold 7 per cent of today’s portfolio combined. 

“The industrial sector is by far the main winner off the back of behavioural changes caused by the covid lockdowns,” Mr Ajaka said. 

“Demand from users is coming from across the industrial spectrum, including large logistical users to your local subcontractor.

“Industrial opportunities in Brisbane are of particular interest — we see a trend where larger corporates will place warehouses in Brisbane over Sydney and Melbourne, simply due to affordability.”

Alternative investment assets have also been attracting a lot of interest in the past six months, according to Ms Conisbee. 

“Alternative real estate ranges from data centres, to healthcare, childcare, residential rental and storage facilities,” Ms Conisbee said. 

“Major institutions are increasingly looking to grow exposure to this sector, particularly given challenges in office and retail.

“Build to rent, life sciences, healthcare, and childcare seen as growth areas. 

“We’re seeing a lot of interest in a lot of alternatives except for aged-care.” 

Mr Ajaka said White & Partners also had some holdings in alternative assets. 

“The child care sector is set to have another bounce back in values due decline in population growth and lack of migration. The Government will be encouraged to announce new baby incentives as we saw under the Howard/Costello government” he said. 

“Pet accommodation businesses are also set to soar. 

“If you go to the local park you see more pets than children at the moment!”