Fresh push for industrial sites
Groups such as DEXUS Property, Goodman Group with its new Interlink in western Sydney (pictured), Charter Hall and Investa Property, among others, are all looking to expand their portfolios.
The trigger is the growth in e-commerce that has led to demand for storage and distribution of goods bought online. In addition, the rise in conversions of industrial assets into residential, such as those being done by Meriton, is shrinking supply.
It is expected that sales of the assets will rise in the coming financial year, driven by the listed and unlisted property trusts and wealthy individuals. The billions of dollars earmarked by the NSW government for infrastructure and transport in Sydney's west will make the areas around the M2 and M4 motorways more attractive.
Jones Lang LaSalle managing director of NSW and head of industrial Michael Fenton said that, according to the company's research, there had been close to $720 million of major industrial sales in the first half of 2013.
Mr Fenton said that while that was within the normal range for recent years, second-quarter sales were only $235 million compared with $483 million in the first quarter.
"A few more sales might close prior to June 30, resulting in the second quarter being revised up by no more than $80 million or so," he said. "There has been a stark slowdown in transaction activity in the last three months.
"With pricing of industrial assets strengthening, we expect a significant pick-up in transactions volumes.
"There has certainly been a shift in vendor sentiment. Owners of well-located prime and secondary-grade assets can sense the growing wave of capital-seeking opportunities in the industrial sector will shift pricing further in their favour in the second half of this year."
Mr Fenton said there was a bigger list of buyers than sellers and he did not expect the market dynamic to change soon.
"Further analysis of the stock sold so far this year shows that if related-party transactions, land sites, residential conversion sites, sub-$10 million sales and assets in non-core product or locations are stripped out, only half of the pipeline of $720 million of sales would be considered 'available opportunities' for groups looking to invest in warehouse and logistics product today," he said.
"This further highlights the mismatch between investment capital and available product we will see for the remainder of this year."
According to new research from CBRE, Sydney, Perth and Brisbane all rank in the global top-10 list of cities with the most expensive prime logistics rents. The firm's Global Industrial View report says the wider Asia-Pacific region dominates the top-10 rankings.
Frequently Asked Questions about this Article…
Industrial property demand is outstripping supply, especially along the eastern seaboard. The article says growth in e-commerce has driven demand for storage and distribution space, while conversions of industrial sites into residential uses (for example by Meriton) are shrinking available stock. That combination is attracting interest from listed and unlisted property trusts, institutional groups and wealthy individuals.
According to the article, the rise of e-commerce has increased demand for storage and distribution of goods bought online, pushing up demand for warehouse and logistics product. Jones Lang LaSalle noted that pricing of industrial assets is strengthening, which they expect will lead to a pick-up in transaction volumes.
The article names several groups expanding industrial holdings: DEXUS Property, Goodman Group (which has a new Interlink in western Sydney), Charter Hall and Investa Property. It also notes Meriton as a developer converting some industrial assets into residential use.
Jones Lang LaSalle's research showed close to $720 million of major industrial sales in the first half of 2013. Sales were uneven across quarters — roughly $483 million in the first quarter and $235 million in the second — and there was a noticeable slowdown in transaction activity in the last three months, although a few more deals might close before June 30.
The article explains that when related-party deals, land sites, residential conversion sites, sub-$10 million sales and non-core assets are removed from the $720 million pipeline, only about half would be classed as genuinely available warehouse and logistics opportunities. That creates a situation where lots of capital is chasing relatively few suitable assets, which can push pricing in sellers’ favour.
Yes. The article notes billions of dollars earmarked by the NSW government for infrastructure and transport in Sydney's west are expected to make areas around the M2 and M4 motorways more attractive to investors and occupiers of industrial property.
New research from CBRE cited in the article ranks Sydney, Perth and Brisbane among the global top 10 cities with the most expensive prime logistics rents. The CBRE Global Industrial View report also says the wider Asia–Pacific region dominates the top-10 rankings.
Based on the article, investors should watch transaction volumes and quarterly sales data (such as the JLL figures), pricing trends for industrial assets, vendor sentiment (owners’ willingness to sell), supply changes caused by residential conversions, and local infrastructure projects (for example in western Sydney). Research and reports from firms like Jones Lang LaSalle and CBRE are also useful indicators of market direction.
Call 1300 880 160
Start a chat
Schedule a call
