Commercial Real Estate and Agriculture lending conditions positioned for further positive growth.
The Partners Fund continued to benefit from improving investment market conditions during December, as the Australian economy moved out of recession and expectations for future economic performance were upgraded. At the mid-year economic and fiscal update, the government upgraded its 2021 GDP growth forecast to 4.5% (from 4.25%) and lowered its forecasts for unemployment, following similar upgrades by several major economists.
Reflecting the continued attraction of lending against hard assets such as commercial real estate, the Australian real estate market was named the 8th most attractive geography for real estate investment in Savills’ 2021 global outlook, which surveys 120 global property investors, managers and family offices. Around 70% of survey respondents expect real estate investment to increase or stay at similar levels over the next 12 months. Savills said the top Australian investment areas include the logistics sector, repositioning sub-regional shopping centres, and CBD offices. Notably, while expecting flexible working conditions and preferences for non-CBD locations may lead to higher vacancies in the near term and that many tenants will introduce changes to the way they occupy office space, Savills believes working patterns will normalise in 2021 and there will be no major demise across the broader office sector. This is consistent with our strategy, which has seen the Partners Fund take advantage of several attractive opportunities throughout 2020.
Conditions in our agriculture lending portfolio also remain strong, buoyed by resilient agricultural commodity prices and improving weather conditions, which are supporting asset valuations. We continue to see strong demand for financing in the sector.
