Market Overview
Australia's alternative investment property market is expanding, driven by demand for niche sectors such as healthcare facilities, data centres, and manufactured housing parks. These assets benefit from trends like aging demographics, digitalisation, and housing shortages, offering stable returns and diversification. Institutional and private investors are active, though prolonged high interest rates and costs are slowing some transactions. While funding for private credit and equity remains available, regulatory and financial pressures are influencing asset values and market activity, albeit these sectors remain appealing for long-term growth and resilient yields.
Asset Focus – Licensed Hotels and Pubs
A Challenging Start to 2024
In 2024, the Australian pub market began in much the same way as it did the previous year, with investor activity subdued by the lingering effects of interest rate hikes implemented by the Reserve Bank of Australia. The market was caught in a period of uncertainty, as investors faced the possibility of either a significant downturn or a recovery driven by improved economic conditions. The challenging environment forced operators to adopt a cautious approach, which often involved putting plans for refurbishments and new ventures on hold.
Rising Operational Costs
Despite the slow initial pace, high interest rates remained a key challenge. Although rates stabilised throughout the year, rising operational costs – including increased wages, utilities, and insurance – further squeezed margins for pub operators. This combination of high costs and tighter financial conditions pushed investors to focus on businesses with strong, consistent cash flow and established profitability. This investor preference for stability over speculation became a defining feature of the year.
Institutional and Regional Market Trends
Institutional investors demonstrated continued confidence in the pub sector. A notable example was Charter Hall’s acquisition bid for Hotel Property Investments, which underscored the sector's attractiveness as a long-term investment. Similarly, major players such as Australian Venue Co. remained active in expanding their portfolios, acquiring high-quality assets in key locations.
While urban pubs retained their appeal for both domestic and international investors, regional and coastal venues at a generally lower price point saw an unexpected surge in interest. This was driven by demographic shifts and the ongoing recovery in domestic and international tourism. Pubs in areas with strong tourist demand became highly sought after by private investors and owner-operators, many of whom sought a balance of financial return and lifestyle benefits.
Positive Market Outlook for 2025
As 2024 drew to a close, the market remained resilient, with a broad range of buyers actively seeking opportunities. With the outlook for 2025 looking positive – particularly if interest rates decrease – there is strong potential for a more dynamic market. Investors are likely to see increased transaction volumes and fresh opportunities emerge as the sector continues to evolve.
Opteon Insights – Alternate Markets
Hotels, Motels, and Resorts
The outlook for accommodation property in 2025 is generally positive, driven by the recovery of domestic and international tourism, along with increased travel demand supporting the sector.
Key trends include a shift towards sustainable and eco-friendly accommodations, the adoption of advanced technology for enhanced guest experiences, and a rise in luxury and wellness-focused offerings. However, rising operating costs, including energy and labour, may pressure margins and slow new development and refurbishments.
Regional destinations and premium properties will likely see sustained interest from both domestic tourists and investors. Institutional investors, private equity, and REITs are expected to continue seeking opportunities, with luxury and eco-friendly properties drawing significant attention. However, the impact of high interest rates on financing costs may affect buyer behaviour and transaction volumes. While market sentiment remains optimistic, a potential disconnect between buyer and seller expectations on pricing could influence deal flow.
Overall, the market will remain active, especially in key tourist areas, but economic factors will play a significant role in shaping investment strategies. Buyers may focus on high-yield or niche segments, such as boutique hotels or sustainable resorts.
Ryan Danaher,
Head of Alternate Investments
0457 648 002
ryan.danaher@opteonsolutions.com
Caravan Parks
The Caravan and Camping Industry contributes an estimated $27.1Billion to the Australian economy annually (Caravan & Camping Association of Australia: 2024).
Increasing domestic economic pressures and international geo-political events have fuelled increased demand for domestic tourism accommodation. Conjunctionally, increased cost of living pressures has supplemented accommodation demand within caravan parks due to their appeal as an affordable accommodation option, especially in the face of acute permanent rental and established housing shortages.
These economic and financial circumstances have continued to underpin strong occupancy and revenue levels within caravan parks, particularly those aligned to popular holiday destinations.
This asset class remains highly favoured property investment by a diverse array of purchasers ranging from ‘husband and wife’ single caravan park operators to large private and publicly listed entities operating portfolios of multiple caravan parks across diverse geographies.
Duncan Cameron,
Director (WA)
0413 449 477
duncan.cameron@opteonsolutions.com
Gaming Venues - New South Wales
The market for NSW gaming hotels remains soft due to the high-interest rate environment, high cost of living pressures, difficulties in obtaining funding and the ongoing uncertainty surrounding the NSW Government’s proposed changes to the operation and trading of gaming entitlements.
Whilst the Government has not finalised their plans in respect to the operation and trading of gaming entitlements the market has already factored in the downside where the value of gaming entitlements (as opposed to gaming hotels) has all but halved over the past two / two and half years from (say) $650,000 per entitlement to (say) $350,000 per entitlement.
This has resulted in fewer sales and a general softening of yields from (say) 6.5% to 7.5% for the better-quality Sydney hotels. These sales have been to a concentration of buyers being the larger and established hotel operators.
Good hotel assets are rare but when offered to the market are highly sought after.
Ian Britton,
Senior Valuer (NSW)
0429 618 820
ian.britton@opteonsolutions.com
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