Investment interest in Australia’s burgeoning healthcare and life sciences real estate market is accelerating, fuelled by the emergence of innovation and knowledge precincts across the country and university tuition reform.
That’s among the key findings of a new CBRE Research Viewpoint: Higher Education & Life Sciences, which highlights how the increasing overlap of education and healthcare is providing a springboard for greater investment in healthcare and life sciences real estate.
CBRE’s National Director of Science & Research, Project Management, David Keenan said tertiary institutions and precincts remained critical infrastructure to Australia’s future.
“Australia’s tertiary system has an increasingly important role to play in its creation and support of a more skilled and educated workforce. Adding value at the front and back end of the traditional value curve is one of Australia’s greatest opportunities at present – a real opportunity to differentiate and build on many world-leading industries, with these developing precincts and their ecosystems a key contributor to this.”
Mr Keenan added: “The Parkville campus of the University of Melbourne is an exemplar of this, with the institution anchoring the precinct with several major hospitals. From those foundations, a rich research and innovation district has developed over time to include world class medical research and associated entities.”
New emerging precincts underway in Australia include the Tonsley Innovation District in South Australia, Fishermans Bend in Victoria, Western Australia’s Murdoch Health & Knowledge Precinct, Westmead in New South Wales and Herston Quarter in Queensland.
Mr Keenan said the impact of COVID-19 would place even greater importance on sustainability for both new and existing developments in the sector.
“As a result of COVID-19, there has been greater emphasis on hygiene and cleaning, particularly for laboratory spaces. These spaces are already generally more expensive to operate given their higher rates of energy and utility consumption, therefore improving sustainability will be critical to help lower running costs – particularly pertinent during a time of economic downturn.”
The report highlights how life science real estate has gained institutional investment acceptance over the past decade, with REITs, private equity and foreign entities injecting US$6.8bn into the sector in the US alone in 2019 – reflecting 95% growth year-on-year. The trend is mirrored in Australia, with $549 million worth of healthcare, medical centres and hospitals transacting during 2019 – an uplift of more than 100% from 2018.
CBRE Senior Managing Director of Capital Markets, Pacific, Mark Coster, said although COVID-19 had impacted investment flows, interest in alternative sectors such as education had been rising, underpinned by the search for yield and income security.
“Increasingly, education and university real estate is viewed as an attractive investment sector, with investors actively raising capital for these assets. Universities in particular continue to offer key investment fundamentals that capital is seeking – despite the current challenges of closed international borders and some campuses running online only,” Mr Coster said.
CBRE Senior Research Analyst Nicholas Volk said although in short-term distress, universities would remain a secure long-term investment given their government backing and upside in the return of international student revenue.
He went on to explain the Federal Government’s plans to incentivise STEM courses from 2021 would help stimulate the downstream development of more specialised laboratory and medical facilities.
“The Federal Government’s move to effectively pull the price lever on university courses seeks to address Australia’s biggest challenges – health, domestic security, food safety and quality, sustainable energy, and the environment. In pushing students towards STEM courses, it is reasonable to see the flow on benefits to these strategic priorities,” Mr Volk explained.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
