Once in a Cycle Buying Opportunity

Investing

Is the worst over for office…?

 The property team at CPF are excited about the potential to acquire quality office assets at or near the bottom of the property cycle.

As Warren Buffet says “…be fearful when others are greedy and be greedy when others are fearful…”

Office assets available for purchase below replacement cost

Currently, there are quality office assets available for purchase at prices that are below replacement cost.

This has been driven primarily by recent increases in interest rates causing a deterioration in investor sentiment towards office assets.

CPF believes owners of office buildings purchased at below replacement cost and approaching land value have an economic advantage and will enjoy outsized investment returns once the property cycle turns and investor sentiment returns.

De-carbonise and create manufactured growth

We also believe an ESG focus on office assets including renewable energy (e.g. battery storage & solar) and upgrading building services (lifts, air conditioning plant, LED lights etc) will attract better quality tenants and lead to higher rents and capital growth.

Current interest rate and inflation cycle appears to have peaked

As at the date of this post, CPF is of the opinion that the current interest rate & inflation cycle has peaked.

The interest rate peak may be evidenced by buyers of US treasuries coming back into the market to purchase bonds in order to lock in higher rates.  This surge of buying activity will create money supply and drive up the price of bonds which in turn lowers rates.

In addition, domestic GDP on a per capita basis is negative.  If we strip out immigration Australia is in a technical recession with corresponding quarters of negative GDP growth..

Further, domestic unemployment, albeit from a very low base, appears to be increasing

Short of any unexpected exogenous factors, we expect the next movement in interest rates to be lower and it is not a matter of ‘if’ but ‘when’ they are cut.

Our intention is to be positioned to capitalise on the expected loosening of monetary policy.

Return to Work Mandates & rising unemployment.

Signs of a faltering employment market may compel return to office laggards to re-consider their position in light of potential redundancies.

The final chapter of this narrative tells a story of more companies issuing return to work mandates which will drive occupancy levels of office buildings and contributes favourably to the outlook for office.

The goal will be to get set in good quality office buildings before the rest of the market wakes up to the opportunity! 

CPF Real Estate Opportunity Fund

CPF is planning to release a fund that will be positioned to capitalise on the above strategy.

If you would like to lean more or to register your interest, please contact Capital property Funds on 02 8004 6218 or info@capitalpropertyfunds.com.au

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