[+] Property’s Hottest Sectors to Watch in 2024

Footy preseason is in full swing and the property league is also gearing up for the new season with a change of tactics in the wind for 2024. Billions of dollars are sitting on the sidelines and chief executives are taking check of where the property cycles lie. There is a consensus the industry is holding back a little and looking towards the second half of the season to bring home the wins. At the highest level of the competition, office, residential and industrial could be taken out by the new kids on the block—commercial residential. Experts predict marquee player build-to-rent will be joined by veteran aged care along with student accommodation, which is expected to make a comeback, despite some niggling injuries. MSCI head of real assets research Ben Martin-Henry says now there is more certainty out there, the institutions should get back in the market. “I think there will be more conversations about to what to do and we will start to see more activity towards the end of the year,” he says. “We are kind of getting to that point as we saw in the GFC, for example, that there’s a lot capital waiting, sitting on the sidelines. “Generally that means the money is not working and investment committees will say, you’ve got $2 billion to spend on property so either do something or we will take it away.” According to MSCI research, the biggest movement in transactions were for Melbourne and Brisbane apartments, driven by interest in commercial residential. ▲ Aura Holdings filed plans in December for McLeod Country Golf Club in Brisbane’s west, comprising 126 independent living apartments. Urbis director Penny Douglas says that although labour supply is still impacting all projects, they are seeing a lot of action in Brisbane’s well-located inner-city precincts. “These projects have seen a strong focus on boutique premium residential developments, build-to-rent projects and developments focussing on addressing the shortfall in student accommodation,” she says, “all of which will play a key role in addressing the current housing crisis and lack of diversity in our housing market. “We are also seeing a number of innovative adaptive reuse projects where developers are exploring the transformation of aged commercial assets into education, health or accommodation assets, introducing retail amenity and ground-level activation.” The Brisbane City Council election scheduled for March and Queensland state election in October will also impact development action. Ratio Consultants chief executive Colleen Peterson says that in Melbourne it will certainly be an interesting year. “I am getting consistent feedback that despite the demand for housing, there is a range of factors that simply make building new housing, in whatever form, unviable,” Peterson says. “From construction costs, labour shortages, taxes and levies, high interest rates and lack of certainty and delays in planning approvals, we have a perfect storm brewing in the housing sector.” Peterson says that despite the need for a fundamental overhaul to up approvals and the number of projects possible there were still areas pulling ahead. “Aged care will continue to boom and I think we will also see a resurgence in student accommodation, given the ongoing demand for international study in Victoria,” she says. ▲ A render of the Architectus and Metier3 designed three-building student housing and BtR village in North Melbourne. “Despite the Federal Government’s crackdown on visas, 290,000 international students are still expected to come to Australia this financial year. “A post-Covid surge, combined with ongoing excellent performance at an international level for several major Australian universities and the perceived safety of Australia, make us an attractive destination for students.” MSCI research shows that in 2023 offshore investors accounted for 22 per cent of acquisitions at $8.8 billion with the biggest net gain seen in commercial residential. However in Sydney the biggest transactional space for all buyers was around industrial and office space while the apartment space was one of the slowest moving. Development-wise, aged care, residential and education have seen the most entrants so far this year, according toSydney and regional planning panels, along with a handful of large scale co-living buildings. ▲ Sydney developer Freecity is planning its next co-living project, proposing 505 co-living apartments at Macquarie Park in plans filed this year. Although commercial residential is the newest player in the big league, a quiet, consistent team could take out the property league championship. Martin-Henry says people will be looking to the big transactions to reset their valuations and make the next play. “I would definitely look out for the big indicators of offices or big shopping centres selling,” he says. “Student accommodation is quite a niche sector ... I think there will be more activity in those. “Health care is now the tightest trading asset class in Australia and there’s many obvious reasons for that. “I’ve never seen anyone say that we have too much healthcare or too many hospitals.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

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Renee McKeown
Fri 16 Feb 24

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