A Shift Towards Healthcare, Aged Care, and Alternative Property Investments Amidst Traditional Decline
Super funds, property funds, and listed real estate investment trusts are expanding their portfolios into sectors like aged care, medical, retail, and build-to-rent properties as traditional office investments face a decline in value. Healthcare leads in terms of size and institutional investment, though various alternative property assets such as hotels, marinas, and cultural facilities are gaining traction.
Australia’s market, valued at an estimated $235 billion, is generally more resilient. These assets can sustain and grow earnings despite high inflation and economic slowdown. Social infrastructure assets, including private hospitals and childcare centers, enhance community wellbeing and are bolstered by public demand and government reforms.
Changes in housing needs and an undersupply of new housing are driving the “living” market segment, which includes student accommodation and retirement communities. Alternative assets are increasingly popular among institutional investors, especially with a surge in Baby Boomers retiring, boosting the value of aged care and medical assets.
Long elective surgery waiting lists are prompting the construction of new private medical centers and hospitals. In 2022-23, Victoria and New South Wales saw patient lists reaching 203,045 and 144,999 respectively. Governments are prioritizing expenditures like medicinal costs and medical research.
Australian Unity’s healthcare property trust recently bought land near the upcoming Melton Hospital, with plans for mixed-use development. With a 6.4% population increase in the City of Melton from 2021 to 2022, the region’s growth is expected to continue.
Both Melbourne and Sydney face housing shortages, further fueled by forecasted arrivals of overseas migrants. The build-to-rent sector is thus becoming appealing to institutions. Melbourne is predicted to surpass Sydney in population by 2031, partly due to skilled migration.
Investing in the housing demand, Australian Super is committing more than 90% of $405.3 million for build-to-rent sites, while HESTA is contributing $240 million to similar ventures in Victoria. The focus will be on social and affordable houses, as well as commercial properties.
CBRE’s healthcare and social infrastructure team emphasizes the interest in ready-to-go medical facilities. High interest rates are causing challenges in acquiring funding for building and fitting out day hospitals, leading to a hunt for existing facilities.
In Sydney, St Basil’s former aged-care facility was sold for $17.25 million. The property, with potential for medical use, comprises an 83-room building with development approval for expansion, reflecting the ongoing interest and activity in alternative property assets.