January 14, 2022

Market Insights


The Partners Fund returned 8.2% (net of fees and costs) to investors over 2021 calendar year. Considering international and state border closures, along with industry closures, this is a strong, risk adjusted result for investors.

Across commercial real estate, the office sector leasing fundamentals started to recover in 2021 with increased leasing enquiry and activity. The Australian CBD office markets recorded 70,100 sqm of net absorption in 3Q21 (the highest quarterly figure since 4Q18), while metropolitan office markets (97,100 sqm) also had a strong net absorption result (JLL Australia and New Zealand real estate investment market themes for 2022). Loans within the Partners Fund portfolio in the office sector across Australia and NZ make up 14% of portfolio value and have a +12% forecast investor IRR (net of fees and costs).

The retail sub-sectors of neighbourhood shopping centres and large format retail centres continued to attract capital with yields compressing for the more prime well-located centres. Yield compression in the large format retail sector ranged from 37.5 to 100 basis points (JLL). The Partners Fund continues to have exposure to this sector with 5% of portfolio value comprising large format retail assets, with a focus on Victoria.

The house lot market in the residential growth corridors continued to be strong. The relative affordability of growth areas over established suburbs and the shift to working from home have continued to be big market drivers. In Victoria gross sales across Melbourne and Geelong have continued to increase, hitting a new quarterly record in September of 7,835 lots (RPM Greenfield Market Report Q3-21). Land subdivision development loans account for 8% of portfolio value, with a focus on Victoria and New Zealand.

The agriculture sector continued a strong growth trajectory across 2021. Initial forecasts for 2022 suggest another strong year ahead across the agriculture supply chain in Australia and New Zealand. The drivers of capital value growth in 2021 remain with the continuation of favourable La Nina weather conditions, lower Australian Dollar, historically low interest rates and strong international demand for Australian agricultural produce. These fundamentals are expected to continue to drive capital value growth in 2022.

Land values have contributed to increased investment opportunities and the growth in value of the underlying security of current investment within the Partners Fund continues to decrease portfolio risk.
Commodity prices broadly remain robust across the broadacre cropping sector. Grain and oilseed prices have been high and the outlook for the summer cropping season is positive. There are four Cropping investments (11% of the portfolio) which has exposure to these strong market conditions.

Cattle and lamb prices are buoyant. Global conditions remain favourable and good rainfall recorded in many locations has been welcomed by the industry. The national cattle herd and sheep flock are rebuilding, however supply remains low. Producer demand is supporting young cattle and lamb prices. The Partners Fund has 12% allocation meat & livestock sector to the grassfed and grainfed cattle markets with both production systems benefiting from strong seasonal conditions, a lower Australian Dollar, and strong international demand.

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