Article | Intelligent Investment
Assets that leading commercial property experts are eyeing in 2024
From Charter Hall to Lendlease, we ask today’s leading commercial property experts for their investment predictions and opportunities for the year ahead.
January 23, 2024
In this first episode of a three-part series, we spoke to David Harrison, Managing Director & Group CEO of Charter Hall, Dale Connor, CEO of Lendlease Australia, and Alex Crossing of CBRE Investment Management.
Here’s their quick take on the best property market opportunities in 2024.
Existing potential of traditional core sectors and prime assetsWith over 35 years of property market experience and having overseen the growth of Charter Hall from $500 million to $87.4 billion of assets under management, Harrison knows how to identify buying opportunities and the strategies behind taking advantage of pricing the market.
“Everyone wants to talk about alternatives at the moment, the living sector and bed, sheds and meds. Interestingly, I think there are going to be fantastic buying opportunities in traditional core sectors,” he says.
“There's a lot of value you can add by selecting assets that have risk, and de-risking them. That could be in the office sector, industrial, retail, or some of the social infrastructure areas that we've now grown the business into.
“We’re looking for opportunities where we think things are mispriced and we can use our skills to take advantage of that and make money for our partners.”
When it comes to the challenging office sector, Harrison sees real potential in prime office assets.
“We're pretty big believers in bifurcation of tenant demand towards modern or modernised assets. With the rise in construction costs and the rise of debt and equity costs, virtually 80 percent of all mooted development from two years ago is just not going to happen.
“So that puts a pressure cooker on good quality assets, but there's no doubt that the evidence is there that modern, prime assets are attracting tenants and maintaining higher occupancy than older stock.”
Listen to the podcast to hear Harrison’s additional take on transformation opportunities across the industrial sector driven by e-commerce as well as the energy transition movement across real estate.
Opportunities in student accommodation and logistics assetsAlex Crossing is the Asia Pacific Regional Head of Indirect Private Real Estate at CBRE Investment Management, one of the world's leading real assets investment managers. The group is responsible for over US$144.2 billion of assets under management with the ambition to deliver sustainable investment solutions across real assets categories, geographies, risk profiles and execution formats.
Where does she see the opportunities in 2024?
“As a house we've been overweight toward logistics since 2012. We saw that as an opportunity to get access, particularly across APAC, to rising incomes, household consumption, household expenditure, and to tap into e-commerce.”
“In the logistics space, we are focused on well-located, consumer-demand-driven locations, and understanding the types of customers remains a high priority or high-conviction strategy for us.”
One other area Crossing sees big potential in is student accommodation.
“This is particularly the case in Australia where we've looked to get access to the local living sector and found student accommodation is the area where the numbers stack up best, despite a number of factors such as regulations and taxes.”
One additional area Crossing is keeping a close eye on in Australia is the healthcare sector. This is despite the local challenges making it harder to invest in and see returns when compared to the U.S.
“I think that is partly driven by the fact that the U.S. is much more of a private health model, whereas Australia is much more of a public health model,” she says.
“So, beds, sheds and meds – they're some of the main areas we’re looking at, and we are particularly looking at all aspects of the living sector space in Australia as the government's policies are very supportive of that becoming a bigger part of the institutional investors’ universe.”
Sustainability in the property and construction marketDale Connor has been with Lendlease for 30 years and is the company’s Australian CEO. It’s a business which has over $30 billion in funds under management, $5.7 billion assets under management and a $29.2 billion development pipeline.
Connor sees sustainability in property and construction as a strong market theme with room for growth.
“It will only get stronger as the pressure comes from climate change and directly through legislation into how we not only build, but operate our assets and our buildings,” he explains in the podcast.
Specifically, this will entail a strong push for renewable diesel and reducing fossil fuel construction. There’s also a focus on electric concrete pumps, electric driven cranes and reducing Scope 1 and 2 in construction. On the design front, Connor notes the shift to electrification in all of Lendlease’s commercial developments going forward.
“And then you start to think about Scope 3, you start to think about the building products - concrete, steel, glass and aluminum. We've just written recently a Scope 3 protocol about how we think about boundaries and measurement and working with industry to help drive embodied carbon out of the basic building blocks of construction. So, I do think sustainability will continue to be something that drives a differentiator between those providing highly sustainable products in property versus perhaps the past.”
Connor also provides his take on some of the major transport solutions aiding Australia’s housing affordability and supply crisis. Alongside this, he talks about transformational opportunities including the significance of Designing with Country.
Australia’s 2024 Property Predictions: Episode 1
In our first episode of our 2024 property predictions series, we chat with Charter Hall’s David Harrison, CBRE Investment Management’s Alex Crossing and Lendlease’s Dale Connor.