Commercial property sector swamped by large institutional investors with deep pockets

Compared to an average of 28 per cent across the previous five years, in 2020 listed and institutional investors upped their share to two-thirds of total healthcare acquisitions, with private investors virtually squeezed out of the market. 

Already in 2021, they account for 80 per cent of healthcare transactions. 

Commenting on this trend, which is highly concerning for investors looking to switch from residential to commercial real estate, Real Capital Analytics warned that while private investors who have traditionally dominated the market remain active, they may start to see their opportunities wane as big players saturate the market. 

While Australia’s largest office landlord Dexus and NorthWest Healthcare Properties remain the largest commercial investors in the medical niche, Barwon Investment Partners and Centuria Healthcare are the largest property acquirers in terms of physical assets.

Real Capital Analytics’ research revealed that in recent years, investors have opted for mergers and acquisitions or acquiring entire portfolios to build scale quickly and efficiently. 

This can best be seen in the healthcare space, with diversified investment manager Centuria acquiring a large stake in Heathley in 2019, with more mega deals expected in the sector soon.

“Establishing a large footprint in healthcare with such a well credentialed healthcare property funds manager provides exposure to an asset class with sound underlying fundamentals and increasing national demand,” Centuria joint chief executive Jason Huljich said recently.

Real Capital Analytics predicts that healthcare is likely to follow in the footsteps of the industrial and residential property investment markets and become increasingly institutionalised over time. 

Their research also highlighted a shift in focus by investors away from CBD markets and towards suburban locations that are often overlooked.

“Healthcare acquisitions have taken place almost exclusively in the suburban markets of the major state capitals,” the research said.

“This is not wholly surprising as not only do these areas represent better value for money than CBD locations, they are located in the main population hubs and in proximity to major residential areas.”