Property market update with Jason Huljich

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.