Industrial property a top performer

Industrial and logistics properties continue to top investors’ wish lists, as vacancy within Perth’s industrial property drops by almost a third within 12 months.

CBRE’s latest Investor Intentions survey found 69 per cent of respondents planned to be more acquisitive in 2021 relative to last year, with industrial and logistics assets top of mind.

In 2020, Australia’s industrial and logistics property market was the only sector to record an increase in sales volumes (up 13 per cent), while buying activity decreased in the office, retail and hotel asset classes.

CBRE senior research analyst Nicholas Volk said COVID-19 had shifted the investment paradigm across the world, highlighting the importance of well-located properties with secured income.

“With substantial amounts of capital on the sidelines waiting to be invested, combined with suppressed transactional volumes in 2020, 2021 is subsequently culminating into a larger year for purchasing activity,” Mr Volk said.

Mr Volk said the Perth market presented an attractive value proposition compared to the east coast.

“Perth’s industrial and logistics market represents an outstanding investment opportunity, with a yield spread of 90 bps compared to the 20-year average of 79 bps for super prime product. For prime assets, the spread narrows to 73 bps, compared to 52 bps,” Mr Volk said.

“Given the current demand for industrial assets and the reignition of belief in the Perth recovery story, it is expected that Perth yields will compress in line with long-term average spreads to the east coast.”

Incentives over the first quarter fell to 10 per cent, which CBRE said had set a platform for further effective rental growth over the balance of the year, particularly from a face rental perspective. 

Ray White Commercial’s latest Between the Lines Research found Perth industrial vacancy dropped by nearly a third in 12 months. 

Ray White Commercial head of research Vanessa Rader said growth in underlying demand for stock had reduced vacancies over the past six months while keeping rental rates elevated.

Last April Ray White recorded about 930,000 square metres of vacant sock, which was now sitting at about 663,613sqm.

Ray White Commercial WA director Chris Matthews said in 2020, the industrial property sector achieved $828.69 million worth of transactions across the Perth metropolitan area, unlike other markets where sales volumes fell by up to 45 per cent during the COVID period. 

2021 outlook

CBRE head of industrial and logistics for WA Jarrad Grierson said a shortage of opportunities for quality industrial assets around the country would support competitive buyer demand for stock for the rest of this year.

“Demand for assets, particularly in Perth where the majority of the market is privately owned, will provide an attractive financial backdrop – helping maintain competitive yields and pricing,” Mr Grierson explained.

“Highlighting the growing momentum is the announcement of the market-setting transaction of Blackstone’s $3.8 billion Milestone Logistics portfolio to ESR. With 15 per cent of this portfolio located in WA, bidding depth and pricing will highlight the demand for industrial property at scale.”

JLL acted as advisor on that deal, which was unveiled earlier this week and is considered Australia’s largest ever logistics real estate transaction.

ESR Australia (an industrial real estate platform) partnered with Singapore-based investment company GIC as its capital partner for the acquisition under a newly formed investment vehicle, ESR Milestone Partnership, where ESR has contributed 20 per cent of the equity.

ANZ Banking Group, Mitsubishi UFJ Financial Group, Standard Chartered Bank and United Overseas Bank are providing fully underwritten debt facilities for the acquisition of the real estate assets.

JLL head of capital markets, industrial and logistics, Australia Tony Iuliano said the transaction was one which would likely never be seen again in logistics in Australia.

“It’s history in the making and a transformational transaction for Australian real estate,” he said.

“54 groups in the data room - a combination of sovereign wealth funds, pension funds, REITs and life insurance groups totalling $45 billion of capital that participated.

“The opportunity to access over 90 tenants and a management platform with significant IP is enormous for any group.”

In response to Business News enquiries JLL said the WA asset was located in South Guildford but was not able to provide further detail on the property.

New land release

The state government this week released new lots at the Crossroads Industrial Estate in Forrestdale, off the back of what it said had been strong demand for industrial land in the south-eastern corridor.

The 12 lots range in size from 2,167 square metres to 6,526sqm, with the opportunity to amalgamate lots up to 1.1 hectares.

The new release of land provides access to major transport routes and the soon to be realigned Anstey Road.

The Anstey Road realignment to Ranford Road forms part of the infrastructure works being delivered following the $27 million commitment by the state government to unlock Forrestdale Business Park West for industrial expansion.

Delivered by DevelopmentWA’s Industrial Lands Authority (ILA), the funds will go toward developing a new pump station, power and water upgrades, critical land acquisitions for wider road reserves, new intersections at Keane and Allen Roads, Ranford and Anstey Roads and Keane and Armadale Roads, as well as upgrades to Allen and Keane Roads to accommodate heavy vehicles.

The work, delivered by Densford Civil, is expected to create more than 100 local construction jobs and is set to be completed in December 2021.

Another large paracel of industrial land has been recently put on the market by Perenti Property.

The group is selling its 7.47 hectare property, which spans three street addresses and two streets in Canningvale. 

Raine & Horne Commercial are marketing the property, located at 6 Uppsala Place and 20-26 Gauge Court, on behalf of Perenti Property. 

The site is offered fully leased to Perenti Global, an ASX 200 global mining services group, and to Robit Australia, with the net passing income of the property is about $2 million per annum.

The property comprises four buildings with an area of 16,208sqm and a hardstand situated adjacent to each building.

The buildings occupy just over 21 per cent of the land, providing potential for subdivision or future development. 

Raine & Horne commercial director Anthony Vulinovich said Perth prime industrial had entered a phase where stock shortage was evident in both land and built form, with that anticipated to underpin growth in both rents and values in the next six to 12 months. 

“We expect the property to appeal nationally to institutional funds and significant family offices active in the commercial property sector, given the properties platform to provide not only instant strong returns but it also has readily accessible further development capacity," Mr Vulinovich said. 

"Given the low-rate environment and business activity in the core areas, one must also not discount that a significant owner occupier may also be interested in the property with the intention to occupy a significant part of the property in the future and lease or sell the remainder."