A tale of two countries: Australian and New Zealand industry comparisons

Research into Australian and New Zealand investment themes for 2022 has unearthed several key findings.

The study, conducted by real estate services provider JLL, summarises six major areas of interest for investors in both countries.

These include a strong recovery in real estate volumes; investors preparing for higher interest rates; acquisitions should be viewed through an ESG (environmental, social, governance) lens. In this regard, Australia and New Zealand are world leaders in the design, construction and management of a real estate with strong environmental credentials.

Social aspects should also be assessed in the acquisition process with greater consideration to stakeholders’ perceptions of the covenant, how real estate integrates with its neighbourhood and the requirements of a diverse workforce.

Growth potential in healthcare assets, capital sources exploring opportunities in COVID-affected industries and the role urban logistics assets play in the supply chain were also under the spotlight in terms of major investment appeal.

Future looks bright

Furthermore, the research found that the long-term economic and population growth outlook for Australia and New Zealand is positive.

On the assessment of these macro variables, Australia and New Zealand are attractive relative to other mature economies. Furthermore, Australia (number 3) and New Zealand (number 6) are also ranked as two of the most transparent real estate markets in the world.

The main limitation for offshore capital sources seeking to build a diversified portfolio of scale in Australia and New Zealand is the limited size of the investable universe.

Gross domestic product disparity

The report emphasises that Australia’s GDP growth rate is expected to accelerate in 2022 (3.8 per cent) and 2023 (4.2 per cent) as the reactivation of overseas migration programs leads to stronger population growth as the economy and real estate markets benefit from the population-multiplier effect.

These projections are at the lower end of analyst expectations with the Reserve Bank of Australia projecting the Australian economy could grow by five per cent in 2022.

New Zealand did not experience the same short-term economic impacts of lockdowns over 2021 and the economy is projected to grow by 2.2 per cent per annum between 2021 and 2024.

Key findings: investment trends and capital potential

Several investors have extended their investment mandate to include exposure to real estate alternatives. JLL saw strong investor interest in self-storage, child-care centres and health-related assets.

One of the benchmark transactions in the self-storage sector was Blackstone acquiring the Fort Knox business (11 Melbourne-based self-storage assets) for $AU400 million.

The report also found that several active investment mandates for data centres, life sciences and build-to-rent were unable to be satisfied due to limited product availability.

Strong occupier demand for data centres in New Zealand has led to CDC developing two data centres – one in Hobsonville and another to the north of Auckland in Silverdale.