Investors eye $21b of industrial assets

Investors eye $21b of industrial assets

15 February 2019

Citing a recent JLL report, The Sydney Morning Herald has revealed that Australia’s booming industrial property sector has been earmarked for a potential $21 billion-plus of investment demand as buyers scramble to get exposure to the sector.

JLL head of industrial and logistics, Tony Iuliano, said demand for industrial property would continue to rise, particularly as institutional investors geared their strategies towards greater exposure in the sector and built their industrial investment portfolios.

“We have identified $21 billion of capital wanting to deploy into Australia’s industrial and logistics assets and therefore project another year of strong demand,” Mr Iuliano said.

“With limited prime assets on the market, we project that the capital seeking industrial property will begin to move towards strategic partnerships as an alternative means to gain exposure into the industrial property sector,” he said.

JLL said investment in logistics facilities and other industrial property fell 40 per cent to $3.2 billion in 2018—the first time since 2012 that industrial sale volumes were below the 10-year annual average of $3.7 billion—but this was due to the diminished availability of assets, not a lack of demand, notes the AFR.

The key drivers of demand are the expanding e-commerce sector, a greater focus on agile supply chain networks, the growing food and grocery sector and increased investment in technology and automation.

Benchmarking prime yields in Australia compared with other global cities, JLL found Melbourne at a yield of 5.9 per cent and Sydney at 5.3 per cent, compared with 3.5 per cent in London.

“In this context, Sydney and Melbourne remain attractively priced relative to a number of gateway cities,” Mr Iuliano said.

JLL Australian research director Sass J-Baleh said demand for space in strategic locations will continue to rise across all Australian cities in 2019 as both existing players and new market entrants seek to set up and strengthen their supply chain networks.

One of Australia’s biggest landlords, GPT, has increased its exposure to the booming industrial property logistics sector with the purchase of two assets in Melbourne worth a combined $28 million, says The Age.

Since mid-2017, the diversified property group has completed six logistics developments, which have all been fully leased and have added $240 million to its investment portfolio.