Record winter crop and opportunities in the office market
Market conditions continue to support the future performance of the Partners Fund.
The ABARES Australian crop report was released this week and it contained further good news for the agriculture sector, forecasting winter crop production of 46.8 million tonnes in 2021-22, 13% above the 10-year average. With favourable climate conditions and high world prices, the area planted to winter crops is set to reach a record high nationally. ABARES noted that there will be differences across growing regions, with yield prospects in most cropping regions in New South Wales, Western Australia and much of Queensland – the key exposure areas for the Partners Fund – very favourable given the attractive seasonal starting conditions and the outlook for winter rain.
In the commercial real estate sector, JLL said this month that it “expects offices to emerge as the beating heart of re-energised CBDs”, with its research highlighting the attraction of the office for internal and external collaboration, interaction with colleagues, and complex brainstorming. The JLL research notes that office space will have to become more agile and elastic, reflecting the changing functions of our cities and the way people want to work. They promote a hybrid use model that provides for employee health and wellbeing while having high reliance on technology to enable “seamless connectivity between office and home”. This view is consistent with our current investment focus in the office sector, with around a third of the Partners Fund portfolio exposed to office construction. Leasing activity in these assets has been extremely encouraging, as companies look to move to the highest quality buildings and locations.
The Partners Fund has benefited from its ability to invest in sectors where capital is scarce. Our experience in the Perth apartment market in 2017 and the Melbourne office market in 2020 are two examples of using this contrarian approach when our in-depth fundamental supply/demand analysis revealed attractive opportunities. Combined with conservative LVRs to manage risk, our investment process will continue to ensure attractive, risk adjusted returns for investors.