Global Capital Sets Sights on Australia’s Alternatives

Global capital is circling Australia’s property market and it’s the once-niche alternatives sector that’s squarely in the crosshairs. Overseas investors are increasing their exposure to everything from build-to-rent, student and seniors accommodation to life sciences and self storage, drawn by structural housing shortages, policy support and comparatively stable returns. In 2025, South Korea led international investment into our alternative living sectors, committing $2.52 billion. The US followed with $1.16 billion, alongside growing interest from Japan.Global heavyweights including Greystar, Hines and Blackstone are also keen. The uptick raises a critical question for the local market; is this surge in offshore interest a cyclical response to global conditions, or a structural shift that will permanently reshape Australia’s real estate landscape? Shifting investor profiles Cushman &amp; Wakefield director of living sectors capital markets Paul Savitz says we’re seeing an increasingly broader and deeper pool of international capital engaging with Australian alternatives. “Large global pension funds, sovereign wealth funds and insurance capital, particularly from Asia, North America and Europe, are increasingly active, alongside specialist global operators and platform investors,” Savitz says. “Compared to earlier cycles, this capital is generally larger scale, more patient and more operationally sophisticated.” The trend mirrors a broader shift across Asia Pacific commercial real estate. ▲ Cushman &amp; Wakefield director of living sectors capital markets Paul Savitz. US capital accounted for 17.4 per cent of APAC investment in 2025, up from 13.9 per cent in 2024. Investment from European funds more than doubled to 6.8 per cent in the same period. In Australia, alternatives sectors led the charge. Cushman &amp; Wakefield estimated commercial real estate investment reached $7.3 billion in the second quarter, the second-highest total on record. This growth was driven by “significant cross-border capital” in student and seniors accommodation, including the sale of Aveo by Brookfield to Scape , the biggest direct real estate transaction in Australian history, according to Cushman &amp; Wakefield. London-based investor consultancy bfinance has 540 clients in 45 countries. Managing director Peter Hobbs says real estate capital flows have been subdued since 2022 as investors chased private credit and infrastructure. “As part of this reduced appetite for real estate there has been a desire for more resilient, often alternative, sectors and locations,” Hobbs says. Australia has experienced an upward trajectory due to these trends, with CBRE reporting a slight increase in Australian investment activity in 2025, of which 30 per cent was from international investors. Opportunity … and risk While sentiment is positive, investors remain disciplined, says Savitz. “Key challenges include planning and approval risk, construction cost volatility, operational complexity, and the availability of experienced local partners,” he says. “Investors are also closely monitoring exit liquidity, particularly for newer asset classes, and are increasingly focused on ESG performance and regulatory alignment.” Political risk remains front of mind. The seniors housing sector, for instance, is highly regulated, while student accommodation can be susceptible to political interference, as seen by the now-scrapped international student caps floated in 2024. ▲ Student accommodation developer and operator Scape has attracted major international interest. That said, the effect of alternative real estate on investor returns globally is revealing. Between 2007 and 2024, exposure to 100 per cent alternatives realised an annualised total return of 8.9 per cent, while a 60/40 split leaning to alternatives returned 7.8 per cent, compared to 6.2 per cent returns for 100 per cent exposure to traditional real estate classes. But growing interest from international heavy hitters in a comparatively smaller market can also lead to overheating, says Hobbs. “[This is due to their] relatively small scale and emergent nature and potential for large investor demand,” he says. “As the asset classes emerge they can be prone to oversupply and aggressive pricing, as we have seen for self storage and life science in the US over the past three years or so.” Residential versus industrial Industrial assets continue to attract offshore capital, including the Canadian Public Sector Pension Investment Board committing $800 million to Aliro Group’s Industrial vehicle last year. But alternative living sectors are gaining momentum. South Korea’s National Pension Service tipped $700 million into Scape Australia’s war chest last year , and Lendlease partnered with Japanese listed company Tokyo Tatemono, which took on a stake in Lendlease’s 899 Collins Street development as its first Australian build-to-rent investment ( pictured at top ). Build-to-rent continues to gain traction, according to Savitz, with strong fundamentals such as supportive policy settings and acute housing shortages. “Mixed-use assets are also appealing as they allow investors to diversify income streams and better manage risk across cycles,” he says. ▲ Retirement operator Aveo was acquired for $3.85 billion by Scape Australia’s parent, The Living Company. International involvement can also drive growth in sectors they are familiar with in their home countries. Build-to-rent (also know as multifamily), for instance, is 30 per cent of the institutional real estate market in the US and continental Europe, but just 5 per cent of the total in Australia. As a result, it will remain one of the strongest growing alternatives sectors in Australia, fuelled by international expertise and interest. “[International] investors have experience of investing in alternatives in other, often more mature markets such as the US, and have the scale and expertise to understand the potential for alternatives,” Hobbs says. Structural or cyclical In the US, alternative real estate grew from less than 1 per cent of the market in 2005 to 12 per cent by 2025. Australia looks seems likely to follow a similar trajectory. Savitz says that assuming macro conditions remain supportive, there is a strong case for transactional volumes to remain elevated into 2026 after surpassing 2024 levels last year. ▲ Aliro Group secured major North American investment last year. “Capital allocations to alternatives are increasing globally, and Australia continues to screen well on relative value, transparency and stability,” he says. “While pricing discipline remains, the depth of capital looking to deploy suggests activity should remain resilient, particularly for high-quality assets and scalable platforms.” Rather than a cyclical shift, international institutional investment in Australia appears to be structural, he says. “International investors are likely to play a more prominent and enduring role, particularly as sectors mature, policy frameworks stabilise and operating platforms become more institutionalised,” Savitz says. “Alternatives are becoming a core part of global real estate allocations and Australia is increasingly viewed as a long-term destination for that capital.”

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