Billions of dollars pouring into Australian industrial property

Billions of dollars pouring into Australian industrial property

14 April, 2017

The Australian industrial property sector saw just over $4.5 billion in sales in 2016 (up from $4.3 billion in 2015), and this trend is set to continue, claims Colliers International’s Industrial Research and Forecast Report H1 2017.

The demand is being primarily driven from offshore investors—especially those based in Asia—and investment funds based in Australia, says Collier’s Research Manager Sas J-Baleh.

Industrial markets in Sydney, Melbourne, Brisbane, and Adelaide have seen strong activity, but Perth has been sluggish and is expected to improve only gradually.

Some of the other factors fuelling property sector growth nationally include:

  • An infrastructure boom in New South Wales, Victoria, and Queensland. A record $150 billion of combined infrastructure investment will be poured into these states over the next four years.
  • Industrial precincts that are well serviced by connecting road transport routes.
  • An improved labour market and growth in industrial industry sectors.
  • Better tenant retention rates, with many tenant expanding their requirements.
  • The current low interest rate environment.
  • Strong GDP growth.
  • Continued growth in retail turnover.
  • A weaker local dollar boosting net exports.

Institutional investors, in particular, have continued to expand their industrial portfolios, particularly within the logistics sector, says Ms J-Baleh. Blackstone, Charter Hall, and AMP have all been actively pursuing industrial opportunities. In 2016, Blackstone alone added around $1.5 billion to their industrial portfolio.

This intense competition for available stock will likely result in fewer industrial assets reaching the market in 2017, particularly high-quality assets.

On the other hand, the current record investment in transport infrastructure should help alleviate supply in the medium-to long-run, says Ms J-Baleh.

An alternate way to raise property ownership is to identify corporate companies for potential sale and leaseback programs—a growing trend that should continue into 2017, she adds.

Australia will experience further cap rate compression over 2017, particularly for secondary grade stock in the Sydney and Melbourne markets, concludes the report.