Goodman bulks up in property search

REAL estate is tipped to be one of the busier sectors in the coming year as investors seek higher yields in a low interest rate environment.

Direct purchases are to increase with local and overseas-based superannuation funds likely to lead the way.

In the past week the global investment giant BlackRock has completed the sale of 555 Lonsdale Street, Melbourne, to the Hong Kong-based LaSalle Investment Management's Australian fund for $57.5 million.

It is a 1980s-inspired, 16-storey building with 16,176 square metres of net lettable area, including a small retail component.

The real estate investment trusts (REITS) are also starting the new calendar year on the front foot with mergers and acquisitions and larger scale leases expected to dominate the headlines in coming months.

In the lead-up to the reporting season for the first half of the 2013 financial year, Goodman Group has unveiled a series of projects with an end value of about $450 million.

These comprise 210,000 square metres of new industrial and commercial development projects across Australia.

This is in addition to $227 million of development works in progress.

Goodman's clients include Bunnings, Metcash, DHL, Linfox, Canon and Fujitsu, reflecting the growth in demand for groceries, computer parts and the distribution of goods bought on the internet.

Of the eight planned projects, the largest is a 53,305-square-metre warehouse and distribution centre, which has an end value of $128 million. Leasing agents suggested it was under contract to Toll Australia.

Goodman's general manager Australia, Jason Little, said it was one of the busiest starts to a new calendar year that he had experienced. "We are seeing a return of confidence from a range of companies and industries, that have been reluctant to commit in the past," he said.

"Where two years ago these businesses would only take a one-year option on a lease, they are now prepared to commit to a longer term tenure.

"The trigger is not just e-commerce, in terms of needing storage for goods bought on the internet, but growth in the underlying business, as evidenced by the leases from retailer Bunnings to Bantex Australia [a manufacturer and supplier of office products]."

For the industrial sector, analysts at Bank of America Merrill Lynch have forecast modest rent growth of about 1 per cent in the coming reporting season. They said industrial development activity should remain a feature, with Goodman and Dexus Property likely to reveal locked-in profits in line with guidance.

"Access to investment-grade stock is limited for those looking to increase their exposure," the analysts said.