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Industrial sector set for billion dollar capital injection

In our opinion, and based on the research we have done, industrial property is among Australia’s most sought-after real estate, with both domestic and global investors driving demand for space in the sector

With limited prime assets on the market, JLL’s Australian Industrial Investment Review & Outlook 2019 forecasts an “alternative means to gain exposure into the industrial property sector”.

A surging market for the industrial property could see as much as $21 billion of investor capital looking for a home in Australia’s industrial market, as detailed in the JLL report.

Approximately $3.2 billion in investment sales occurred across the national industrial sector in 2018. Most of the investment activity was along Australia’s east coast, which represented 90 per cent, or $2.9 billion, of total national sales.

In our opinion, we believe the demand for industrial property in Australia will continue to rise, particularly as institutional investors gear towards greater exposure in the industrial sector.

According to JLL’s Australian Industrial Investment Review & Outlook 2019 report;

New South Wales recorded a significant decline in investment activity between 2017 and 2018, from $1.7 billion to $1.2 billion in 2018 (a fall of 28 per cent), the lowest figure recorded since 2012.

In a 1992 letter to shareholders, Warren Buffett said: “Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return”.

Victoria’s total investment sale volumes increased by 10 per cent over 2018 compared to 2017, despite a continued lack of built industrial investment product. Victoria represented 36 per cent of Australia’s total sale volumes (for transactions $10 million and over). Investment sales in Melbourne were concentrated within the west and southeast precincts, with notable sales including three (of nine) properties part of Cache’s Logistics Trust portfolio, as well as the Kmart Distribution Centre (76,900sq m facility) at Truganina snapped up by Logos for $119 million.

Queensland investment sale volumes in Queensland dropped by half over 2018 ($491 million) compared to levels recorded in 2017. But like Sydney’s market, there was limited opportunity to purchase stock. The state represented 15 per cent of Australia’s total sale volumes for transactions $10 million and over. The largest transaction recorded over the year was Mapletree’s purchase of Coles distribution centre in Heathwood for $105 million.

The report also identifies the Australian industrial market’s key drivers which include the expanding e-commerce sector, a greater focus on an agile supply chain network, the growing food and grocery sector and increased investment in technology and automation.

REMI Capital has an offer in the West of Melbourne, with a Town Planning Permit, Building Permit and Contract approved for stage 1 and 2. It will comprise of new warehouse units in a great location, only minutes to Western Ring Road, Melbourne, and a 15-minute drive to Port Melbourne. Stage 1 consists of 29 warehouse units and will form a concrete renovation and strata subdivision of existing improvements and the creation of 9 newly constructed units. All units will include bathroom facilities, kitchenette, router shutter door access and ample on-site car parking. Stage 2 with 30 strata title units, with an end value of $28m.

The project is on track with the capital needed, and the offer is now closed.

Source: The Urban Developer


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