The Partners Fund has flexibility to invest in loans secured by assets across an increasingly diverse range of market sub-sectors. Some of these markets have been undergoing significant structural shifts, resulting in an increasing level of investment opportunities.
Companies are beginning to revisit their office relocation strategies due to the impact of COVID-19 on the traditional “workplace”. A desire to create more flexible working conditions, including working-from-home arrangements and workplaces closer to transport hubs, along with a desire for cost efficient spaces and locations has meant higher demand for fringe locations. We have previously seen this in Melbourne and are now seeing number of opportunities in the Sydney fringe office market.
The core fringe office market in Sydney have experienced lower vacancy rates and the lower level of supply means incentive packages are likely to remain significantly lower than CBD incentives. With record levels of enquiry over the first half of the year, we expect any new projects in these core areas will be highly sought after.
Another market which has seen a significant demand shift has been the Gold Coast apartment market, where data from Urbis showed apartment sales rose almost 100% in the March quarter from the previous period, marking the strongest quarterly sales result since 2013. The increased demand is being driven by intra-state moves within Queensland, followed by demand from Victorians, while the key driver has been downsizing owner-occupiers who have displaced investors as the primary purchasers. Urbis says the unprecedented demand has led to a stock shortage, with the rate of sales expected to remain for several years. Apartment stock is now at historically low levels and we expect this to review an increasing number of opportunities in this sector in coming months.
In agricultural markets, local prices have gained despite a broadly softer global commodity complex, assisted by the weaker Australian dollar. There has been strength in barley, wool, cotton, and canola, while beef and milk have experienced record highs in recent months. Seasonal conditions are favourable and further good rainfall is predicted, ensuring land valuations will be well supported. With conservative loan-to-valuation ratios and limited agriculture lending competition, the Fund is able to achieve attractive relative returns with limited downside risk.
