A snapshot of Australian bank/super fund exposure to commercial real estate

Bank exposure to commercial real estate has risen to 13% of loans, while super fund holdings total a larger 16% of their assets.
Kieran Davies

Coolabah Capital

Commercial property prices have fallen sharply in most advanced economies over the past year or two, with Green Street Advisors calculating 20%-plus declines in the US and euro area and the RBA estimating a roughly 10% decline in Australia as at late 2023.      

Against this backdrop, CCI has taken a snapshot of the exposure of Australian banks and super funds to commercial property and infrastructure.  

In aggregate, bank loans to commercial real estate have reached about $0.4 trillion, edging up to 13% of total bank loans over the past couple of years.

This is a little above the 12% average of the past two decades, but well below the 17% peak reached during the global financial crisis. 

However, there is a marked divergence in the exposure of different banks.  

The exposure of foreign banks continues to trend higher and has reached a series-high 21% of their local loan book.  

The exposure of the major domestic banks has edged up to 10% of their loans, while commercial real estate loans written by small domestic banks make up only 4% of their loans. 

In comparison, superannuation fund holdings of commercial real estate and infrastructure currently total over $0.35 trillion.

While super fund holdings are a little smaller in dollar terms, the exposure of pension funds is greater than banks when expressed as a share of assets.  

Across the pension system, commercial property and infrastructure – where most of it is unlisted – currently accounts for 16% of total super fund assets, which is at the high end of the range of a relatively short history. 

Commercial property and infrastructure accounts for 19% of industry fund assets, 16% of public sector fund assets and 10% of retail sector assets.  

Bank exposure to commercial real estate has picked up a
little as a share of loans over recent years, with foreign banks most exposed
relative to their loan book
Bank exposure to commercial real estate has picked up a little as a share of loans over recent years, with foreign banks most exposed relative to their loan book
Super funds have increased their exposure to
commercial real estate  and
infrastructure more than banks as a share of assets
Super funds have increased their exposure to commercial real estate and infrastructure more than banks as a share of assets

Investment Disclaimer Past performance does not assure future returns. All investments carry risks, including that the value of investments may vary, future returns may differ from past returns, and that your capital is not guaranteed. This information has been prepared by Coolabah Capital Investments Pty Ltd (ACN 153 327 872). It is general information only and is not intended to provide you with financial advice. You should not rely on any information herein in making any investment decisions. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. The Product Disclosure Statement (PDS) for the funds should be considered before deciding whether to acquire or hold units in it. A PDS for these products can be obtained by visiting www.coolabahcapital.com. Neither Coolabah Capital Investments Pty Ltd, Equity Trustees Ltd (ACN 004 031 298) nor their respective shareholders, directors and associated businesses assume any liability to investors in connection with any investment in the funds, or guarantees the performance of any obligations to investors, the performance of the funds or any particular rate of return. The repayment of capital is not guaranteed. Investments in the funds are not deposits or liabilities of any of the above-mentioned parties, nor of any Authorised Deposit-taking Institution. The funds are subject to investment risks, which could include delays in repayment and/or loss of income and capital invested. Past performance is not an indicator of nor assures any future returns or risks. Coolabah Capital Investments (Retail) Pty Limited (CCIR) (ACN 153 555 867) is an authorised representative (#000414337) of Coolabah Capital Institutional Investments Pty Ltd (CCII) (AFSL 482238). Both CCIR and CCII are wholly owned subsidiaries of Coolabah Capital Investments Pty Ltd. Equity Trustees Ltd (AFSL 240975) is the Responsible Entity for these funds. Equity Trustees Ltd is a subsidiary of EQT Holdings Limited (ACN 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT). Forward-Looking Disclaimer This presentation contains some forward-looking information. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such forward-looking statements. Although forward-looking statements contained in this presentation are based upon what Coolabah Capital Investments Pty Ltd believes are reasonable assumptions, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Coolabah Capital Investments Pty Ltd undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.

Kieran Davies
Chief Macro Strategist
Coolabah Capital

Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...

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