Property market update with Jason Huljich
Centuria’s Head of Real Estate and Funds Management, Jason Huljich, shares his outlook for property in 2019, including commercial and industrial property performance around the country and the potential impact of interest rate movements.
What is your outlook for the property funds management sector in 2019?
For us as a fund manager it will be about finding the right opportunities.
There’s a lot of demand for assets, so we will have to work really hard to identify opportunities for our investor clients.
One thing we do very well is buy off-market, so we use our relationships with our agents and with owners to buy these assets before they actually come on to the market.
In terms of sectors I think the tough sector is going to be retail. E-commerce has really affected a lot of shopping centres and you’re seeing those yields start to blow out, we only own one retail centre in our portfolio of 80-odd assets, but I can see that there’s a continuing theme in that retail sector.
Industrial property continues to attract a lot of attention, what do you think is fuelling this interest?
With the industrial sector it is all around e-commerce, so with the significant growth in online retailing we’re seeing huge tenant demand for well-located warehouses closer to the CBD, and the reason for this is so they can service the consumers with their online purchases.
What we’re seeing is forecast rental growth as this demand plays out and because of that we’re seeing a lot of groups try to buy industrial assets. We’re seeing the Australian REITs, the Australian wholesale funds, Singaporean REITs, private equity groups such as Blackstone as well as high net worth’s all looking to get in to the industrial sector.
The commercial sector is also experiencing strong demand, what is driving this?
With the commercial sector, Sydney and Melbourne are definitely the standouts.
Sydney is being driven by infrastructure spend and lack of supply. The current Sydney vacancy rate is 4.1% as at January of this year, which is one of the lowest rates it has ever been. This is driven by not a lot of assets coming out of the ground, and also infrastructure spend such as the metro rail.
On the Melbourne side of things, it is all around population growth and again they don’t have a lot of supply coming on at the moment, but over the next couple of years that will steadily increase.
And what about the other capital cities?
In my opinion I think they’ll both continue to be strong.
Commercial property both in Sydney and Melbourne will go form strength to strength. The supply is still a little way off.
Industrial, I can’t see that demand quietening down at all, the demand is increasing, the whole e-commerce story is getting stronger and stronger and we’re starting to see that rental growth come through particularly in Sydney, so I can see the demand for those assets continuing to grow.
Economists’ views on interest rates have shifted, how do you see this impacting the property sector?
We’ve seen the group economists from most major banks now forecasting 1 to 3 cuts over the next 12 months, which is quite a change from 6-12 months ago.
Usually how this plays out means increased demand for yield play, such as commercial property.
So I think both industrial and commercial will stay strong over the next 12-18 months. People will be looking for yield and commercial and industrial property is one place where they can get it.
Finally, how are your funds performing?
Our funds have been performing really well.
We’ve had 6 out of the top 10 funds in the PCA IPD Australian unlisted core retail property fund index for the last 7 quarters.
On the occupancy side of things, we’ve had our vacancy rates are as low as they’ve ever been.
And with our unlisted open-ended funds CDPF, we’re about to buy the first direct asset in that fund which is quite exciting as well.
Watch Jason’s Property market update for December 2018.
This video was issued on 19 March 2019 by Centuria Property Funds Limited (ABN 11 086 553 639, AFSL 231 149) (CPFL) and Centuria Property Funds Management No. 2 Limited (ABN 38 133 363 185, AFSL 340 304) (CPF2L), wholly owned subsidiaries of the Centuria Capital Group (ASX: CNI). CPFL and CPF2L act as Responsible Entity/trustee for a number of listed and unlisted property funds each of which are issued under a product disclosure statement (PDS) that is available on Centuria’s website centuria.com.au for all funds open for investment. CPFL is the Responsible Entity for the Centuria Diversified Property Fund (ARSN 611 510 699) (CDPF). The information is of a general nature only and has not been prepared taking into account your particular investment objectives, financial situation and needs. You should read the Product Disclosure Statement and assess whether any advice is appropriate before making any investment decision. You should also consider seeking the assistance of a professional investment adviser. Past performance is not a reliable indicator of future performance. CA-CPFL-06/03/19 5:45 PM-00941.