Fundamental – Issue 3

Market outlook

We have been busy since the last edition of Fundamental assisting our clients to navigate uncertain economic times.

A highlight has been a series of boardroom lunches we co-hosted with MSCI, bringing together many executives from our property fund clients to report on first quarter 2024 data and discuss the current state of the market. Some of the learnings and issues include:

  • Commercial property transaction volumes continue to be weak (36 per cent down), and this is expected to continue in the near term. This contrasts with some other jurisdictions, such as the United Kingdom, with higher levels of transactional activity where vendors appeared prepared to sell at a loss.
  • The Australian office market vacancy rate was 8 per cent, which compared favourably to 12 per cent for Europe, 21 per cent for the US, and 22 per cent for the UK.
  • The best performing property markets are Korea, Singapore, and Japan. This necessarily reflects a relatively low interest rate environment and the non-proliferation of working from home in those jurisdictions.
  • All Australian property sectors have recorded value declines, including retail, industrial, and healthcare. This has seen gearing ratios increase to around ‘GFC levels’ in some cases. However, demand for alternative property assets (such as agriculture and self-storage) has remained solid.
  • 2024 build to rent (BTR) completions will see the biggest year in Australian history for openings of BTR assets, and 50 per cent of BTR assets in the next four years will be developed by overseas investors.
  • The most active sellers are public REITs, and the biggest buyers are private investors, which is consistent with previous downturns.

In summary, the prevailing sentiment is that the market remains challenging, and this is likely to persist until there is more certainty around the direction of interest rates in the medium term. However, in the meantime, the economy remains quite strong, so, generally, rental arrears are manageable, and banks remain accommodating. What this means is fund managers are not expecting overall transactional activity to increase in the immediate term, or at least not until the later part of 2024.

There is also frustration expressed at the level of regulation and taxes, particularly with the current housing shortages. Many managers are saying they cannot invest in Victoria with its current policy settings.

Despite the current challenges, ‘Mr Market’ has delivered, there are always opportunities, and we continue to work with our clients to exploit those as they present themselves. We hope this edition of Fundamental helps to inform you. Enjoy!


Harry New

Harry leads our financial services team and focuses extensively on financial services law and corporate advisory.

Sean McMahon

Sean has more than 25 years’ experience in the funds management and corporate sectors and co-leads the Hall &...

Related industries

You might be also interested in...

Investment Funds | 6 Mar 2024

Fundamental – Issue 2

Welcome to our second edition of Fundamental, a new publication from the HW Funds team.

Investment Funds | 30 Nov 2023

Fundamental – Issue 1

Welcome to our first edition of Fundamental, a new publication from the HW Funds team.