CBRE survey shows that while industrial assets continue to be a preferred asset class, changes are afoot
Data centres have jettisoned up the list of preferred Australian property asset classes for lender funding in the wake of Blackstone’s recent $24 billion AirTrunk acquisition.
A new CBRE Australia Lender Sentiment Survey highlights data centres have leapfrogged into third position as the most preferred sector for investment – behind industrial and built to sell assets – as local and offshore lenders reassess their exposures.
CBRE Research tapped a mix of 40 local and international banks and non-bank lenders for its H2 2024 Lenders Sentiment Survey prior to the Reserve Bank of Australia’s November cash rate decision.
At a topline level, the results highlight that Australian industrial assets are continuing to attract the highest lender interest, underpinned by the sector’s strong fundamentals.
Lender preferred asset class for new investment (top two responses)
Residential assets are also in focus, with the build to sell sector coming in at 2nd place. However, the preference for build to sell allocations declined for the third consecutive period, following surging interest in data centre investments.
CBRE’s Managing Director of Debt & Structured Finance Andrew McCasker noted; “Data centres experienced the largest half-on-half increase to become the third most preferred asset class amongst Australian lenders. Globally, investment interest in data-centre assets has increased substantially following a rise in data storage requirements, cloud computing and technological advancements.”
Darcy Frawley, CBRE Pacific Data Centres Capital Markets Director added; “Occupiers are now competing aggressively to increase their data centre footprint to accommodate future business needs. Australia is set to see a large gap between capacity and demand in the medium term, which will lead to significant rental growth and make the sector even more appealing for data centre investors.”
Other key survey findings include:
- More than 80% of lenders expect at least one rate cut by June 2024. Nearly 1/3rd of lenders expect that the cash rate will tighten to 3.6% by the end of 2025, representing 75bps of cuts.
- Loan appetite has remained consistent with levels in H1 2024, with 60% of lenders noting an increase in new loan appetite over the next three months, the same as H1 2024.
- Most lenders expect little change in covenant breaches over the previous six months (73%), with the same amount expecting little change over the next six months.
- Covenant breach expectations have materially stagnated from H1 2024, when 43% of lenders expected breaches to increase over H2. CBRE attributes this to stabilising macro-economic and sector-based performance across the country.
- Lenders noted two key variables that are impacting refinancing decisions in H2 2024: leverage and asset type.
You can read the full report here: https://www.cbre.com.au/insights/reports/h2-2024-australia-lender-sentiment-survey.
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