Why CBA’s Head of Real Estate sees market confidence returning with help from Alternatives

From a global financial crisis to a pandemic, operating in the commercial real estate lending space is unpredictable and dynamic. 

George Vallas is someone who has first-hand experience in dealing with the sector’s extreme highs and lows. As an industry leader with a career spanning more than 20 years at the country’s largest corporate real estate lender, the Commonwealth Bank of Australia (CBA), George is clear when it comes to today’s market sentiment. 

“I'm optimistic around asset values holding up and I actually expect you might see some increases in some sectors,” he says in CBRE’s latest Talking Property podcast.  

As the CBA's Head of Real Estate, Institutional Banking and Markets, George has a pulse on everything from commercial property trading activity to the latest market challenges. 

Return of market confidence 

It’s important to highlight that as Australia's largest commercial real estate lender, the CBA increased its sector exposure by approximately 4% in the December 2024 half to $98.4 billion. 

“Transaction volumes are up in the second half of last year and we expect more of the same through the 30th of June,” says George.  

“There is definitely more confidence coming back into the market. The growth for us has not been specific to one sector. It's been quite broad.”  

While market confidence is tracking in a positive direction, George notes that he is not yet seeing pre-pandemic levels of performance. 

“The deal flow has definitely increased, but it's not back to pre-COVID levels and I think that will take some time.  

“Pre-COVID we were seeing a lot of flows coming from greater China and that's come off materially. Singaporean investors have continued to invest over the last couple of years, and they've executed on some material transactions.  

“The domestic syndicators have started to be quite active again, and we expect this to continue. And we're seeing a fair amount of flow from Japan and we would expect this to continue as the majority of it has come post-COVID and where it came in earlier, it's been in sectors or assets that have actually performed quite well and therefore you would expect to see more flows from that market.” 

Housing solutions

The challenges of housing in Australia are evident with George saying that CBA’s support of the country’s housing supply remains a strategic priority. 

Data centres  

George sees significant opportunities with data centres in the coming 12 months with the growth in AI.  

“There is just simply a lot of debt and equity chasing that asset class. And secondly, every time I want to get something done, the response is we need to consider an AI solution. It's really been ingrained on us and understandably so, given AI solutions are scalable and really drive productivity.” 

Self-storage 

Growing allocation towards self-storage is an ongoing priority for CBA. 

“We've also continued to grow the industrial and logistics sector as the demand in this asset class remains constant and e-commerce penetration here in Australia still lags what we’re seeing in Europe, North America and parts of Asia.” 

Retail 

While not part of the universe of alternative assets, positivity still surrounds retail assets and George is bullish on fortress-style retail assets with efficient transport infrastructure surrounding them.  

“These will benefit from strong population growth and more density that is likely to be built around those locations. I really can't see more supply being brought in the short to medium term. 

“I know the REITs with exposure to retail are operating at very high occupancy rates, which is supporting higher operating incomes. 

Office is equally important to CBA. This is reflected with increased activity across domestic investors alongside offshore investors coming back into the market.