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PODCAST: These are the real estate sectors making a comeback

They took the biggest hit during the pandemic, but now they’re rebounding faster than anyone expected

November 29, 2023

Population growth, consumer spending, and the return of international students has accelerated the recovery of three sectors hit hardest by the COVID pandemic, JLL data shows.

Current economic pressures have only had a moderate effect on an otherwise faster-than-expected rebound for the hotel, retail, and student accommodation sectors, with some performance metrics even surpassing pre-pandemic peaks.

“I think if you were to go back a few years, people would be talking about journeys to 2025 or 2026 to get back to where we were in 2019. So, I would argue that their recoveries have been quicker than a lot of people expected,” said Andrew Ballantyne, head of research – Australia, JLL, on the Perspectives podcast.

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Average daily hotel room rates across all major locations in Australia are now “significantly higher” than 2019, Ballantyne says, with revenue per available room expected to grow by 23% in Melbourne and 30% in Sydney through to 2027.

With demand drivers including domestic tourism – including business conferences – and visiting family and friends, the hotel and hospitality sector is capturing investors’ attention. Hotel transaction volumes over the year to September 2023 are at a 10-year high.

In retail, cost-of-living pressures are “moderating” overall turnover growth, however increasing rents across most major shopping centres point to the sector moving in a positive direction. Meanwhile, mall owners’ efforts to attract shoppers by creating ‘experiences’ within their centres are starting to pay off. Online retail captured 12.8% of overall spend in September 2023 compared to 14.3% two years prior, according to the NAB online retail survey.

“A lot of shopping centre owners have been very active in creating experiences within their centres and creating a real reason for people to want to go there,” Ballantyne said. “Generally, when you get people there, you see them then spending on discretionary items as well.”

Discussing JLL’s Q3 2023 real estate data with podcast host Rebecca Kent, Ballantyne highlighted that population growth had been a critical factor in real estate’s recovery, with a “multiplier effect that makes it a key variable in the performance of real estate”.

Meanwhile, the resurgence of one of Australia’s largest export sectors, international education, is delivering a boost to the purpose-built-student accommodation sector. This was recently demonstrated by the foray of Blackstone, the world’s largest commercial landlord, into the Australian student accommodation sector after purchasing the Student One portfolio in September.

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“We're seeing a number of global investors saying that ‘living’ as a sector is something they want to have greater exposure to moving forward,” Ballantyne said on the podcast. “We might view these sectors as niche now, but they have the potential to become mainstream due to the demand tailwinds they have which is ultimately going to lead to more asset creation.”

Listen to all JLL’s Perspectives podcast episodes by clicking here.