Industrial Outlook 2020: JLL
Industrial Outlook 2020: JLL
14 February 2020
According to JLL’s latest Australian Industrial Investment Review & Outlook 2020 report, the Australian industrial sector remains one of the most sought-after sectors, by both domestic, regional and global capital sources, as it is underpinned by stable long-term factors.
Here’s a summary of some of the key report findings.
Transaction volumes were slightly above the 10-year annual average: The Australian industrial and logistics sector recorded AUD 4.0 billion of transaction volumes in 2019. Volumes were supported by several portfolio transactions which occurred in the latter half of the year.
Australia is in a prime position to take advantage of changing demographics within the world’s emerging markets. The Asia Pacific region’s evolving economic and demographic factors include leading global economic growth, rapid urbanisation, and a growing middle-class population. These factors combined will positively influence the demand for Australia’s exports, particularly within Australia’s food sector.
A depreciating Australian dollar is attracting investment sale activity as well as trade activity: The imports of goods have been steadily on the rise; however, Australia has been exporting more and is in a trade surplus since 2016.
Australia’s industrial investable universe is growing: approximately AUD 88.2 billion in value, or 55.2 million sqm of gross lettable area (GLA) and estimated to reach AUD 114 billion in value by 2024.
Offshore buyers maintained a notable share of total investment sales: Offshore capital sources remained active participants in the Australian industrial and logistics sector, acquiring AUD 0.9 billion in 2019. Offshore capital was sourced mainly from Hong Kong, USA, Singapore, Germany and Switzerland.
The Asia Pacific market is growing and, in turn, attracting capital to the region with Australia being a beneficiary: The Australian market offers a liquid, stable and strong return performance trend, low interest rates, a weakening dollar, and robust growth mainly supported by infrastructure expenditure and population growth.
Global investors are aware of the relatively larger role that cross-currency impacts play as a factor of returns: A greater number of lenders are seeking to capitalise on cross-currency advantages by way of lending or investing in a region. Australian lending opportunities may present a relative credit-spread-for-risk opportunity for USD and EUR denominated investors, amongst others.
Consumer staples is a significant and stable long-term driver of the industrial sector: The high consumption of consumer staple goods impacts transport distribution, warehousing and logistics, cold storage space, high-tech innovation and development (particularly for food and pharmaceutical products), as well as manufacturing facilities. Domestic population growth as well as global demand influences – particularly within the Asia-Pacific region – will further drive the sector in the short, medium and long run.