Warehouses to boom amid online growth

The limited supply and rising demand for industrial property will lead to a significant rise in prices in the coming years. This applies to new developments and established properties.

Analysts said the growth in online retailing had led to an explosion in demand for storage and distribution warehouses.

According to Mark Courtney, director of research for industrial property at Colliers International, the national industrial property market is poised to embark on a new development cycle.

Mr Courtney said this was happening as traditional approaches to storage and distribution were being retired and the online juggernaut generated a new set of industrial accommodation opportunities.

"Consumers' love affair with online has transformed the logistics and retail warehousing sub-markets into the most sought after by institutional investors and tenants looking for greater efficiencies," Mr Courtney said.

"Opportunities to build larger warehouses and super-sized distribution centres in transport infrastructure rich hubs have strategically been seized upon, with listed property groups like Goodman, Dexus, Australand and Charter Hall leading the way and dominating the provision of new supply to the market.

"Melbourne's Derrimut, Laverton and Truganina, Sydney's Eastern Creek and Erskine Park."

One of the latest sales was by a private Melbourne investor who paid $27.5 million for an industrial unit and warehouse complex at Smeaton Grange in Sydney's south-west.

The selling agents, CBRE directors Angus Klem and Mick Ferreri, said demand was strong for the 1-11 Smeaton Grange Road property, which comprised six industrial units, ranging in size from 1143 square metres to 9138 sqm.

The property also includes two attached, high clearance, freehold title warehouses with offices.

Mr Klem said the complex was popular for its accessibility to the M5 motorway.

"The sale generated strong interest, with 13 bids - predominantly from high net worth individuals as well as a number of syndicators," Mr Klem said. "The strength of investor demand elevated the eventual sale price by $2 million during the second round of the expressions of interest campaign."

The complex has a weighted average lease expiry (WALE) of about six years. Mr Klem said it had a strong income stream and medium and long-term exit strategies.

It was sold on an initial yield of 10.8 per cent, which Mr Klem attributed to the property's location in a secondary but emerging industrial precinct and the relatively large size of the units.