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CBRE’s latest research has tapped into the perspectives of 40 local and international banks, as well as non-bank lenders, to gauge the current climate of Australia’s commercial real estate market.
The H1 2024 Lenders Sentiment Survey has unearthed several key trends and shifts that could redefine the landscape of commercial lending in the coming months. At the forefront, the survey indicates a growing appetite for lending, with 58 per cent of respondents wanting to grow, and none wanting to decrease their commercial real estate exposures.
The industrial and logistics sector continues to be the favourite of the lending community, buoyed by record-low vacancy rates and strong rental growth. This sector’s resilience and promising returns have cemented its position as the most popular asset class among lenders due to its perceived security.
However, the survey also revealed significant shifts in lender preferences for other asset classes. Notably, build-to-sell projects have surged ahead of build-to-rent, becoming the second most favoured asset class. This change marks a departure from recent trends where build-to-rent had been gaining traction.
For the first time, the survey allowed lenders to separately rank student accommodation, healthcare assets and data centres, which were previously grouped together under the “alternatives” category.
This new granularity has highlighted a strong interest in student accommodation, which emerged as the third most preferred asset class. In contrast, healthcare assets and data centres found themselves at the bottom of the preference list, even trailing behind stabilised office assets.
Another notable trend from the survey is the reduced appetite from offshore lenders for Australian opportunities. CBRE’s managing director of debt and structured finance, Andrew McCasker, attributes this shift to offshore banks prioritising their home markets to manage local exposures.
Despite this, Australia’s commercial real estate market remains well-supported by domestic banks and non-bank lenders.
“We believe this is due to offshore banks focusing on home markets to manage local exposures. Australia continues to be well supported by domestic banks and non-bank lenders and while there is some caution when it comes to certain asset classes, we expect lender appetite will keep growing as interest rates stabilise and asset values begin to reflect market sentiment,” McCasker stated.
The sector-based findings of the survey further underscore the evolving dynamics within the market. CBRE associate director of debt and structured finance, Will Edwards, noted that nearly one-quarter of surveyed lenders had identified student accommodation as one of their top two preferred asset classes.
“Strong demand fundamentals and the fact that Australia is relatively undersupplied when it comes to purpose-built student accommodation is underpinning lender interest in this sector,” Edwards explained.
Edwards also highlighted the rising interest in build-to-sell projects.
“While interest in this sector has been subdued over the past 18 months, the market is resetting to accommodate increased building costs,” he said.
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