This article is from the Australian Property Journal archive
FOUR Australian superannuation funds including Cbus Super, Hostplus and TWU Super are investing a combined $284 million into alternative real estate classes in the US through a Nuveen fund, as investors look to diversify away from the troubled office sector.
Nuveen’s US Cities Workplace strategy invests in alternative workplace assets such as the medical office, life science, technology research and development and studio production sectors, in American cities it has identified as best-positioned for demographic and structural growth.
“The strategy is built on the foundation of innovation, healthcare and technology demand drivers,” it said.
“The underlying subsector selection provides strong diversification and its mission-critical attributes have proven particularly valuable through the pandemic period.”
Andrew Kleinig, managing director and head of Australia at Nuveen, said, “For us, this is the exciting start of four new partnerships with institutions looking to generate long-term income for their investees.
“Against a difficult economic background, we see fundamental opportunities in the US alternative workplace sector and look forward to sharing these with our new partners.”
Australian real estate investors have looked on as office values overseas have come off heavily in the COVID fallout of higher vacancies and incentives, and lower occupancy. The trend is expected to land down under. Listed office asset values have held up so far in Australia, but are likely to fall in the coming 12 months because of the weaker market fundamentals and the increasing cost of debt, Moody’s Investors Service has said.
Barrenjoey analysts have warned office tower prices could come off by 15% to 20%. Colliers is expecting capital values to drop by an average of 10% from peak-to-trough, before the market recovers in 2024, a much less turbulent trajectory than the GFC which saw some assets suffer 25% in devaluations. AMP Capital chief economist Shane Oliver has tipped unlisted commercial property values, including both office and retail, to come off by 15%.
Together, Cbus Super, Hostplus and TWU Super manage over $176.5 billion of retirement savings on behalf of over 2.5 million members. The fourth fund investing in the Nuveen fund is unnamed.
Hostplus and TWU Super were advised by JANA Investment Advisers.