Investors should be pouring money into well-located offices, shops, hotels and hospitals – not just housing – because property values are going to surge across the board, said veteran real estate analyst Sameer Chopra.
Calling himself “probably the most optimistic human being in Australia”, Mr Chopra, who is head of research at CBRE (and before that at Merrill Lynch), said it was an “amazing time to buy real estate”.
“When others panic, that is when you should be active,” Mr Chopra told an industry lunch last month.
His thesis for this call to action is based on three main factors: the impact of more than one million people arriving in Australia within three years on demand for real estate and infrastructure; the high cost of constructing new property; and his forecasts for a deep unwinding of interest rates with up to 10 cuts in the next cycle.
On the first of these factors – population growth – Mr Chopra said adding more than one million people within three years (550,000 people last year, 350,000 this year and 250,000 next year) would require not only construction of 400,000 houses, but also commercial development across the board.
The impact of these people coming to live in Australia, he said, translated into the need to build 4.5 million square metres of new logistics space, 800,000 square metres of additional retail space, 800,000 square metres of office space, 11,500 hotel rooms and 3,300 hospital beds.
“A typical hotel is 500 to 600 beds so we need to build 20 new hotels … 800,000 square metres of incremental retail demand is four to five Chadstone [shopping centres] … 4.5 million square metres of warehouses is about 200 Melbourne Cricket Grounds, and 3000 hospital beds means we need to build 15-20 private hospitals,” said Mr Chopra.
“We are feeling [this demand] in the residential market, but it’s going to spread its wings.”
While there was a reluctance from banks and non-banks to lend money for transactions in the office market, Mr Chopra said, everything in that sector was “getting constrained”.
“That’s when I start to get excited when markets start to get very constrained,” he said.
The real estate analyst said that CBD office visitation was back to 75 per cent of pre-COVID-19 levels across Australia and that return-to-office would not be an issue next year.
Source: AFR
